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Another name for the inventory conversion cycle is the inventory turnover cycle. This term refers to the period it takes for a company to convert its inventory into sales, highlighting the efficiency of inventory management and the speed at which products are sold. It is a crucial metric for assessing the liquidity of a business's inventory.

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What is the difference between physical and perpetual inventory?

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ER Diagram for purchase and inventory system?

An ER diagram for a purchase and inventory system typically includes entities such as Product, Supplier, Customer, Order, and Inventory. The Product entity would have attributes like ProductID, Name, and Price, while Supplier would include SupplierID, Name, and ContactInfo. Relationships would show that a Supplier can provide multiple Products, a Customer can place multiple Orders, and each Order can include multiple Products, affecting Inventory levels. The Inventory entity would track quantities of each Product available, linking back to the Product entity.


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All sales of inventory on account are recorded in the "Sales" or "Sales Journal" window of an accounting system. This window captures details such as the date of the sale, the customer name, the amount sold, and any applicable sales tax. Recording these transactions helps maintain accurate accounts receivable and inventory records.


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An inventory card should include the item name, description, and SKU or identification number for easy tracking. Additionally, it should contain the quantity on hand, the unit of measure, and the location of the item within the storage facility. Recording the cost per unit and the total value of the inventory is also important for financial analysis. Lastly, including date of last restock or expiration date helps in managing inventory turnover effectively.