Accounting procedure in merchandizing business In Berbera district Somaliland

MOHAMED NUUR JAMAC MOHAMED ABDI SIYAD

GOLLIS UNIVERSITY THESIS

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Accounting procedure in merchandizing business in Berbera district Somaliland

Chapter One: 1.0 Introduction

1.1 Background of the Study Merchandising business is such a type of business whose activity is based on purchasing inventory and selling it. Usually merchandising business serves as intermediary between customer and producer, or customer and distributer or distributer and other distributer. In short merchandising business is the language of buying and selling. Merchandising business earns its revenue by selling goods, merchandising businesses range in size from side walk vendors to corporate giants. Every successful merchandising business makes extensive use of accounting information and answers such questions how much inventory is in hand, how much to order, when to order, and from which supplier? It also keeps track of the amounts owed to each supplier and due from each credit customer. Therefore accounting is a part of information system needed by the merchandising business to measure its success or failure, accounting facilitate making decisions for corrections and also accepting or refusing long term planned projects. For each business type there is special accounting procedure to determine the result of operations that ultimately leads to the computation of comprehensive income and other financial reporting aspects of business operations 1.2 Problem of the statement Availability of applicable accurate and reliable accounting information is highly considered factor that leads business organization to success. It gives the opportunity of making right decisions and implementing profitable projects which all contribute business target. However missing this information causes making wrong decisions and implementing improper projects which all decline business development. Moreover, timely collecting, processing, managing and controlling
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Accounting procedure in merchandizing business in Berbera district Somaliland

accounting data results, and presenting reliable financial statements that truly interpret business activity is crucial to the success of the business. There should be systematic accounting procedure which matches business type, since business development strongly depends on effective accounting information. 1.3 Purpose of the Study The purpose of this study is to present and interpret accounting procedure in merchandising units and how its practiced by Somaliland business organizations include
1. To test the hypothesis of no significant relationship between the levels

accounting procedure and merchandizing business. 2. To bridge the gaps identified in the related studies.
3. To

validate

existing

information

about

accounting

procedure

and

merchandizing business on the theoretical/conceptual framework to which this study is based.

4. To generate new accounting based on the findings of this study.

1.4 Objectives of the Study General objectives This study analysis how merchandising accounting procedure contributes decision making and selecting profitable projects Specific objectives To evaluate how merchandising businesses in Somaliland use computerized accounting and manual accounting system. To focus the role of inventory in merchandizing businesses and how it is calculated and treated in preparing financial statements. To present how merchandizing statements are different from other businesses financial statements.

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Accounting procedure in merchandizing business in Berbera district Somaliland

1.5 Research Questions This study will seek to answer the following questions: 1. What are the demographic characteristics of the respondents as to: 1.1 Age? 1.2 Gender? 1.3 Martial status? 1.4 Educational background? 1.5 Work experiences?
2. What is the level of accounting procedure in merchandising business? 3. What is the level of merchandizing in different business organizations? 4. Is there a significant relationship between the level accounting procedure

and merchandizing business? 1.6 Hypothesis of the research 1.7 Significance of the Study The beneficiaries of this study are to include the following: Decision Markers and Policy formulators to make policies towards the development of procedure and merchandizing business. The Academicians and traders for getting the empirical evidence about procedure and merchandizing business, the future researchers will utilize the findings of this study to embark on a related study. The governments will benefit this study, to reduce the level of projects failure. 1.8 Scope of the Study This study concerns accounting procedure in merchandizing businesses in Berbera district Somaliland. The sample data was collected from merchandising businesses in Somaliland irrespective of their size and type. The study focuses on businesses that use accounting system and employ accounting skilled personnel or owned by accounting skilled people.
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Accounting procedure in merchandizing business in Berbera district Somaliland

Chapter Two: Literature Review 2.1 literatures Review 2.1 Operating Cycle of Merchandizing Business Merchandising Businesses do set of series activities that start circulation from one point then returns to the same point. Generally operation cycle covers three business activities as follows. Purchase of Merchandise; usually merchandizing business purchases inventory for resale from suppliers, this inventory is kept in save area and recorded in systematic manner. Sale of Merchandize; in merchandizing businesses inventory is purchased only for resale. So as soon as it is received, the purchaser prices by adding profitable percentage amount to the cost price so that it shall be ready for sale. Collection of the receivables, during the end of credit period, the merchandizing business collects cash from debtors. Most of the collected cash will be spent for purchasing inventory for resale again. Selling all goods in cash is not mostly possible, so that the business sells goods on account. Also credit sales will extend customers.

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Accounting procedure in merchandizing business in Berbera district Somaliland

Fig 1 Operating Cycle of Merchandizing Business

2.2 Inventory Inventory is the term used to describe the assets of a company that are intended for sale in the ordinary course of business, are in the process of being produced for sale, or are to be used currently in producing goods to be sold. Inventory in a business is a list of goods or products that are held in stock. It takes a lot of time to keep inventory, but failure to do so could result in major financial disasters. Depending on the size of your business, there are people whose sole job is to keep track of inventory, but in a small business this is not possible because of its size

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Accounting procedure in merchandizing business in Berbera district Somaliland

2.2 Chart of Accounts for Merchandising Business Assets Cash Accounts receivable Merchandise inventory Office Supplies Prepaid Insurance Store Equipment Acc. Depreciation Office Equipment Acc. Depreciation Liabilities Accounts payable Salaries payable Unearned rent Notes payable Stockholders Equity Capital stock Retained earnings Dividends Income Summary Revenues

Sales Sales returns and allowances

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Accounting procedure in merchandizing business in Berbera district Somaliland

Sales discounts Costs and Expenses Sales salaries expense Advertising expense Depreciation expense Misc. selling expense Office salaries expense Rent expense Insurance expense Office supplies expense Other income Rent revenue Other expense 2.2 1 accounting for merchandising inventory At the end of accounting period inventory in hand is valued, so the profit or loss of the business can be obtained. The term inventory is used in this manner to designate merchandise hold for sale in the normal course of the business the merchandise purchased for sales. There are two approaches used in accounting for merchandising inventory either of these two approaches may be used in accounting for merchandising inventory. Periodic (physical) inventory
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Accounting procedure in merchandizing business in Berbera district Somaliland

Perpetual inventory

In the last decades both systems were in widespread use, but today however, most large businesses and many smaller ones use perpetual system. Periodic systems are used primarily in small business with manual accounting systems. 2.2.2 Periodic inventory system In this system the revenue from sales are recorded when sales are made, but inventory on hand (ending inventory) cannot be recognized until physical count is taken place at the end of the accounting period. This following information is required: The cost of merchandise sold during the accounting period The cost of inventory on hand at the end of accounting period

For merchandising enterprises that use the periodic system, the merchandising sold during the accounting period is reported in separate sections in the income statements. The periodic inventory system is often used by retail enterprise that sells many kinds of lower cost merchandise. Mostly, using periodic inventory system is very limited because of excessive advertisements of technological devices to access perpetual inventory system that are easy and simple. 2.2.3 Perpetual Inventory System In this system both cost of goods sold and inventory on hand are available when ever required. Currently most of the large merchandise businesses use it, since it is simple and accessible. 2.2.4 Classification of Inventories Inventories can be classified according to type of business:
Merchandise Inventory

Merchandise available on hand and available for sale to customers for e.g.: canned foods, meats, dairy products etc. Items in the merchandise inventory have

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Accounting procedure in merchandizing business in Berbera district Somaliland

two common characteristics such as they are owned by the company and they are in the form ready for sale to customers in the ordinary course of business
Manufacturing Inventory

Merchandize that needs to be produced in order to sell is called manufacturing inventory. Although products may differ, manufacturers normally have three inventory accounts, each of which is associated with a stage of the production process: raw materials inventory, work-in-process inventory, finished goods inventory. 2.2.5 Inventory Valuation Methods 2.2.5.1 First-in-first out (FIFO) The FIFO method assumes that a company uses the goods in the order in which it purchases them. In other words, the FIFO method assumes that the first purchased goods are the first used (manufacturing concern), or the first sold (in a merchandising concern). The inventory remaining must therefore represent the most recent purchases. FIFO often parallels the actual physical flow of merchandise because generally it is good for business to sell the oldest units first. That is, under FIFO, companies obtain the cost of ending inventory by taking the unit cost of the most recent purchase and working backwards until all units of inventory have been costed. This is true whether a company computes cost of goods sold as it sells goods throughout the accounting period (perpetual system) or as a residual at the end of the accounting period (periodic system). 2.2.5.2 Last-in-first out (LIFO) The LIFO method assumes the cost of the total quantity sold or issued during the month comes from the most recent purchases. That is, the latest goods purchased are the first to be sold. LIFO coincides with the actual physical flow of inventory. The method matches the cost of the last goods purchased against revenue. Under the LIFO method, the costs of the latest goods purchased are the first to be
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Accounting procedure in merchandizing business in Berbera district Somaliland

recognized in determining the cost of goods sold. The ending inventory is based on the prices of the oldest units purchased. Companies obtain the cost of the ending inventory by taking the unit cost of the earliest goods available for sale and working forward until all units of inventory have been coasted. 2.2.5.3 Average Cost Method (Avco) Under the average cost method, the costs of goods are equally divided, or averaged, among the units of inventory. It is also called the weighted average method. When this method is used, costs are matched against revenue according to an average of the unit of cost of goods sold. The same weighted average unit costs are used in determining the cost of the merchandise inventory at the end of the period. For businesses in which merchandise sales may be made up of various purchases of identical units, the average method approximates the physical flow of goods. This method is determined by dividing the total cost of the units of each item available for sale during the period by the related number of units of that item 2.3 Income Statement for merchandise business Sales; this is business inventory sold for profit earning with in an accounting period. In merchandising business, inventory is purchased at cost price for resale. To earn profit a percentage amount is added to the cost for resale.

Cost of goods sold; this is the cost price for only the inventory sold, it is the result form goods available for sale, minus remaining inventory. Gross profit; the excess amount of sales over the cost of goods sold is known as gross profit. Operating expenses; these are the expenses incurred for profit making. Running business means doing activities for making sales, therefore all

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Accounting procedure in merchandizing business in Berbera district Somaliland

expenses that are directly or indirectly related to the sales operation is known as operating expenses. Operating income; this is the excess of gross profit over the operating expenses. Other expenses; these are expenses incurred other than operating expenses, good example is interest expenses. Other income; this is indirect income earned during the accounting period. This is a source of income out of inventory resale. Good example is gain on sales, discounts received etc. Net income; this is the excess of all incomes over all expenses incurred with in an accounting period. This is the common target or objective of all merchandising businesses. 2.4 Other types of sales

2.4.1 Consignment sales Consignment is a type of sales in which goods are sent by trader to his agents to be sold on his behalf for commission. The seller or trader who sells the goods is known as consignor, and the person to whom the goods are sent is knows as consignee, the consignor is known also principal. The consignee is also known as agent. The goods sent by the consignor to the consignee are known as consignment goods or goods sent on consignment. the statement which is prepared and sent by the consignor to the consignee along with goods is known as invoice .it shows the details of goods sent such as the quantity price, colors, brands and size, the statement shows the descriptions of the goods. The statement which is prepared and sent by the consignee to the consignor is knows as account sale. It gives details regarding the sales value, expense incurred, the value of unsold goods and commission payable to him. The goods are sold by the consignee for commission, the commission is payable by the consignor to the consignee on total sales 2.4.2 Installment sales This type of sales in which the buyer of fixed assets is allowed to pay the price of the assets in specified number of installments stated in the agreement of the parties. Each installment includes a part of the assets and interest is calculated for the period on outstanding balance of the price for that particular period, it is
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Accounting procedure in merchandizing business in Berbera district Somaliland

calculated at a specified rate of interest. The buyer of the asset become owner immediately on the date of purchase itself and ownership is transferred from seller to the buyer

Chapter three: Research Methodology 3:1 Methods of data collection Considering availability of reliable data which is useful for merchandising businesses, by collected both primary and secondary data so that the recommendations are based on meaningful facts. The primary data is collected through questionnaires that have been distributed to owners and employees around 200 people throughout Berbera district, implementing stratified random sampling data took 20 as a sample out of the population. 3.2 Method of Data Presentation and Analysis The data have been analyzed after each table in a

In this paper researchers presented data in tables, in each table includes related and combined questions. percentage form with bio-chart. 3.3 Limitations One of the major difficulties was that there was no researcher done study on the same topic. Also there was no written sources available from the selected businesses The owners and the employees of the businesses are not familiar in providing financial information, since researches are not usually exercised in Somaliland. This was the first time for researchers to conduct such findings. No extensive time for doing research

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Accounting procedure in merchandizing business in Berbera district Somaliland

Chapter four: Date presentations and Analysis 4.1 Presentation of Date and Analysis
Table1: Respondents by Age Group

Alternatives Below 25 yrs Between 2540 yrs Above 45 yrs In table1, it gives that 60% of the respondents are in between 2540 years old, while 30% of them are above 45 years old, and the rest 10% are in between 2540 years old

Respondents 2 12 6

Percentage 10% 60% 30%

R e s p o n d e n t s Belo w 25e g r o u p by ag
A b o ve 45 y rs 30% y rs 10%

Between 2540 yrs 60%

Table2: Respondents Business Status Alternatives Employee Employer In table 2, 90% of the respondents are employee for the business, while 10% of the respondents are employers for the businesses. Respondents 18 2 Percentage 90% 10%
R s o d n s tu e p n e ts ta s
E ploy m ee E ploy m er

10%

90 %

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Accounting procedure in merchandizing business in Berbera district Somaliland

Table3: Form of businesses Alternatives Proprietorship Partnership Corporation Table 3, shows that 70% of the visited businesses were proprietorships while 30% were partnerships, which means no corporation was met by the observers. Respondents 14 6 Nil Percentage 70% 30% Nil
b s esf r u in s o m
P p to h ro rie rs ip C rp ra n o o tio P rtn rs ip a e h

3% 0

0 %

7% 0

Table4: Sorts of goods with merchandise businesses Alternatives Food items Building materials Electrical materials Electronics Drugs Others Table 4, presents all kinds of goods purchased and sold by the selected businesses, 40% of the goods are food items while 20% is building materials, another 15% are electrical materials, and 10% are electronics, likewise 10% are undefined items sold, the rest 5% are drugs merchandises. Respondents 8 4 3 2 1 2 Percentage 40% 20% 15% 10% 5% 10%

S orts of g oods
Food items Buildingmaterials Electrical materials Electronics Drugs Others

10% 15%

5% 10%

40%

20%
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Accounting procedure in merchandizing business in Berbera district Somaliland

Table5: Reasons for selecting types of merchandises Alternatives Because of high demand Because of maximum profit Because of less competitors Others Table 5, shows that 90% of the respondents selected the type of merchandises for its higher demand, while 5% of the respondents selected the type of merchandises because of maximum profit and also similarly another 5% selected because of less competitors, and no selection for another reason. Respondents 18 1 1 Nil Percentage 90% 5% 5% Nil

Reasons for merchadise selection

Because of high demand Because of maximum profit Because of less competitors Others

5% 5%

0%

90%

Table6: Sources of merchandise businesses Alternatives Inside vendors Outside vendors Respondents 12 8 Percentage 60% 40%

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Accounting procedure in merchandizing business in Berbera district Somaliland

In this table, 60% of the respondents stated that they receive goods from inside vendors, while 40% of the supply is received from outside vendors

S p lys rc s u p ou e
Ins vendo ide rs O ide vendo uts rs

40% 60%

Table7: Type of merchandise businesses sales Alternatives Retail basis Wholesale basis Both retail and wholesale Consignment Table 7, points that 50% of the businesses sell their goods on retail basis, while 20% are for wholesale basis, and 30% sell for both retail and wholesale, and no business uses consignment sales. Respondents 10 4 6 Nil Percentage 50% 20% 30% Nil

Type of sales
Retail basis Wholesale basis Both retail and wholesale

30%

0% 50%

20%

Table8: Number of employees in the businesses Alternatives Less than 10 Between 1050 More than 50 Respondents Percentage 14 4 2 70% 20 10%
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Accounting procedure in merchandizing business in Berbera district Somaliland

Table 8, 70% of the businesses responded that the number of their employees are lesser than 10, while 20% responded between 1050 and the rest 10% stated more than 50.

N me o e p ye u b r f m lo e s
Les tha 10 s n More tha 50 n B etween 1 --50 0

10% 20% 70%

Table9: Kind of accounting system usage in businesses Alternatives Computerized accounting system Manual accounting system This table shows that 90% of the selected businesses use manual accounting system, while only 10% uses computerized accounting system. Respondents 2 18 Percentage 10% 90%
Accountings ystem
Computerisedaccounting system Manual accounting system

10%

90%

Table10: Reasons for implementing accounting procedure Alternatives For decision making For profit or loss disclosure For error and fraud prevention Respondents 8 6 6 Percentage 40% 30% 30%
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Accounting procedure in merchandizing business in Berbera district Somaliland

For other purpose Table 10, shows that 40% of the respondents implement accounting for decision making, while 30% implement for profit or loss disclosure and other 30% use accounting for error and fraud prevention, and there is no business uses it for another purpose.

Nil

Nil

R a on fora c n gu e es s c ou tin s
For decis m kin ion a g For profit or los dis u s clos re For error a fra pre e nd ud v ntion For other purp e os

30% 40% 30%

0%

Table11: Differentiation of business merchandise accounting procedure from other businesses accounting procedures. Alternatives All transactions are based on purchases and sales There is no overhead cost Preparation of gross profit All of the above Table 11, shows that 50% of the respondents say all transactions are based on purchases and sales, while 30% say that variance is the preparation of gross profits, and 20% say that there is no overhead cost. Respondents 10 4 6 Nil Percentage 50% 20% 30% Nil

Merchandise Vs other businesses

All transactions are based on purchases and sales

30% 20%

0% 50%

Table12: Types of transactions recorded in the businesses Alternatives Double entry system Respondents 6 Percentage 30%
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Accounting procedure in merchandizing business in Berbera district Somaliland

Single entry system According to table 12, it presents that 70% of the financial transactions are based on single entry system, while the rest 30% transactions are based on double entry system.

14

70%

T rans action recording

Double entry system Single entry system

30% 70%

Table13: Businesses accounting periods for financial statements Alternatives Annually Semi annually Quarterly Monthly Daily Not fixed Not at all 30% of the respondents say that their financial reporting based on annually, likewise 30% prepare their financial statements semi annually, and 20% prepare as quarterly, 10% of them do not use fixed term also another 10% of the respondents do not use financial reporting period, and no business uses monthly or daily financial reporting. Respondents 6 6 4 Nil Nil 2 2 Percentage 30% 30% 20% Nil Nil 10% 10%

A c c o u n t in g p e rio ds
A n n u a l lSe m i a n n uQaul a r t e rMy o n t h lD a i l y N o t fi x eNdo t a t a l l y ly l y

0% 0%

10% 20%

10%

30%

30%

Table14: Inventory Reorder levels

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Accounting procedure in merchandizing business in Berbera district Somaliland

Alternatives At minimum level At reorder level At maximum level At deadline Others Table 14, gives that 60% of the respondents order goods at minimum level, while 20% order with in reorder level and also another 20% order at deadline time, there is no business which orders goods at maximum level, similarly no respondent orders goods by the use of other methodology.

Respondents 12 4 Nil 4 Nil

Percentage 60% 20% Nil 20% Nil

I v noyr o e l v l n e t r e dr e e
Am i u l vl t i mme e n A mxmme e t ai u l v l Oh r t es 0 % 0 % 2% 0 2% 0 6% 0 A r od rl v l t e r e ee A d a ln t e di e

Table15: Types of inventory valuation approaches in businesses Alternatives Periodic approach Perpetual approach Not of them Table 15, shows that 70% of the respondents say that they use periodic approach for inventory valuation, while 10% use perpetual approach for inventory valuation, and 20% of them do not use any approach for inventory valuation. Respondents 14 2 4 Percentage 70% 10% 20%

I v n o yv lu to n e t r a ai n a po c p r ah
P r d a po c e io ic p r ah P r e u la p o c ep t a p r ah N to t e o f hm

2% 0 1% 0 7% 0

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Accounting procedure in merchandizing business in Berbera district Somaliland

Table16: Businesses inventory stocktaking methods Alternatives Fifo method Lifo method Avco method Weighted Average Not at all In this table, 60% of the respondents say that they use FIFO method for stocktaking, while 40% of them do not use any stocktaking method for inventory, and no business use LIFO, Avco or Weighted average methods for business inventory valuation. Respondents 12 Nil Nil Nil 8 Percentage 60% Nil Nil Nil 40%

S c ta in m th d to k k g e o s
F m th d ifo e o A c m th d vo e o N ta a o t ll L m th d ifo e o W ig te A e a e e h d v rg

40% 60% 0% 0% 0%

Table17: Business implementations for natural disasters prevention Alternatives Purchase of insurance Save money for contingencies Purchase of protection devices Others Not at all Respondents Nil 10 Nil Nil 10 Percentage Nil 50% Nil Nil 50%

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Accounting procedure in merchandizing business in Berbera district Somaliland

Table 17, shows that 50% of the selected businesses save money for contingencies, while 50% of the businesses do not use any plan for natural disasters prevention, this means no one purchases insurance, no one purchases protection devices and no one uses other technique.

Purchas e of insuranc e 0%

Natural dis ters as

Save money for conting e ncies 50% Purchas e of protecti on devices 0%

Not at all 50%

Others 0%

Table18: Business implementation of segregation of duties Alternatives Yes No 90% of the respondents in selected businesses said no when asked about segregating duties, while only 10% of the respondents insisted that they use segregation of duties Respondents 18 2 Percentage 90% 10%

S ge aio o d t s e r g t n f uie
Ys e N o

1% 0

9% 0

Table19: Techniques by businesses for asset internal control Alternatives By supervision By job rotation By segregation of duties By auditing All of the above By recruiting high personal integrity employee Respondents 6 Nil 2 6 4 2 Percentage 30% Nil 10% 30% 20% 10%
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Accounting procedure in merchandizing business in Berbera district Somaliland

Table 19, presents that 30% of the businesses control their assets by supervision, while another 30% control by auditing, and 20% use all stated control techniques, and 10% control their assets by supervision, the rest 10% use by recruiting high personal integrity employee, and no business uses job rotation.

Business control By
others All of the 10% above 20% supervisi on 30%

By auditing 30%

By segregati By job rotation on of 0% duties 10%

Table20: Employees who access records of cash or credit transactions Alternatives Accountant Cashier Clerk Owner Others Respondents 12 4 Nil 4 Nil Percentage 60% 20% Nil 20% Nil

In table 20, 60% of the respondents say that accountant access cash or credit transactions, while 20% of them say that cashier access cash or credit transactions, and another 20% say that owner of the business access cash or credit transactions, and no business says that clerk or other access cash & credit transactions

Owner 20% Clerk 0%

Accesscash or credit transactions

Others 0%

Accoun tant 60%

Cashier 20%

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Accounting procedure in merchandizing business in Berbera district Somaliland

Table21: Employees who receive or collect cash from customers Alternatives Cashier Salesperson Accountant Clerk Owner Others Respondents 14 4 Nil Nil 2 Nil Percentage 70% 20% Nil Nil 10% Nil

70% of the respondents say that cashier Cash receipt receives and collection cash from Owner customers, while 20% of them say that Clerk 10% Others salesperson receives and collection cash, Accoun 0% 0% tant the rest 10% say that owner of the 0% business receives and collects cash from Cashier customers, and no accountant, clerk or 70% other receive & collect cash from customers.
Sales person 20%

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Accounting procedure in merchandizing business in Berbera district Somaliland

Chapter five Conclusion and Recommendation 5.1 Conclusion Accounting procedures in merchandising units is an accounting system that maintains the records of financial transitions between buyers and seller, because of that the business nature is one acquires merchandise for resale to the customers. The merchandise is purchased by the firm either cash or credit basis, if the transaction is cash purchase, cash is paid and inventory is received but if the transaction is on credit basis, the credit ledger is identified and purchase journal is created for the purchase of inventory on credit, the credit term may allow cash discount for early payment, the discounts are recorded by the buyers as purchase discount and deducted from amount initially recorded as payable. Transportation cost is also very important element in producers of merchandises, its the term between seller and the buyer which indicates the conditions concerning when the ownership of the merchandise is passes from seller to buyer, which party will be the bearer, and those are explained in the (fob shipping and fob destination). At the end of accounting period, inventory in hand is valued by using these approaches; periodic inventory approach and perpetual inventory approach, under these approaches there are valuation methods that are used for calculating end inventory, these methods are FIFO,LIFO and AVCO The output of every accounting procedure is financial statements therefore; the accounting procedures of merchandising units will end these financial statements for every accounting period or fiscal year which may be yearly, half yearly, quarterly or monthly. Last but not least, the accounting procedures in merchandising units in Somaliland are not implemented properly.

Accounting procedure in merchandising business in Berbera district Somaliland 2012

5.2 Recommendation
Merchandising Businesses that customize computerized accounting are very rare

while compared to those who customize manual system; therefore I recommend by computerized accounting system, so that they will be effective, efficient and avoid to facing market competition. To follow general accepted accounting procedure (GAAP), financial transaction recording should be based on double entries system. This will minimize error. Many of the businesses use FIFO method for valuation of inventory, but there are some others that do not use any method, so we recommend the businesses to use one of inventory valuation methods to find ending inventory, and also weighted average can be applied for survival of inflations or deflations. Use of consignment sales will facilitate the principal or owner to sale his/her goods to the international markets or local markets which is located at the same countries or different by employing an agent on behalf of the principal.

Accounting procedure in merchandising business in Berbera district Somaliland 2012