--- title: "Retail Store Bookkeeping: Inventory, POS & Shrink | MCC" description: "Post daily sales, track inventory and cost of goods, and measure shrinkage. Worked monthly example with margin." url: "https://mcc-solutionsnj.com/bookkeeping/guides/bookkeeping-for-retail-stores" --- Bookkeeping guide · Updated October 12, 2026 # Retail Store Bookkeeping: Inventory, POS and Shrink A retail store is an inventory business with a cash register. The profit is hidden in what you bought, what you sold, what is still on the shelf and what quietly disappeared. By [Matthew Coleman](/about), MCC Solutions **Quick answer.** A retail store should record its point of sale summaries (sales by department, tax, payments, discounts, returns and gift cards) instead of every receipt, and compare card batch totals to processor deposits and cash totals to the bank deposit. Want this handled for you? Monthly bookkeeping, cleanup and year-end close for small businesses. Start with a free health check of your books. [Free health check](/bookkeeping/health-check)[Get a quote](/bookkeeping/#interest) **Related:** [NJ 1099 contractor rule (ABC test)](/bookkeeping/guides/nj-independent-contractor-rule-abc-test-2026) · [Trial balance explained](/bookkeeping/guides/trial-balance-explained) · [Owner contribution or loan](/bookkeeping/guides/owner-equity-and-capital-contributions) **Free tools:** [Contractor vs employee cost](/bookkeeping/contractor-vs-employee-cost-calculator) · [Price per unit calculator](/bookkeeping/price-per-unit-calculator) [![Intuit ProAdvisor Gold tier badge](/img/credentials/intuit-proadvisor-gold.png)](https://proadvisor.intuit.com/app/accountant/search?searchId=matthew-coleman77)Gold tier in Intuit's ProAdvisor program. [See my Intuit listing](https://proadvisor.intuit.com/app/accountant/search?searchId=matthew-coleman77) Keeping your own books? Tallyfinch does invoices, bank import and reports on your computer. [See Tallyfinch](/bookkeeping/mcc-books-downloadable-bookkeeping-software) ## Post a daily or weekly sales summary Your point of sale system reports sales by department, tax collected, payments by type, discounts, returns and gift card activity. Record these summaries instead of every receipt. Compare the card batch totals to your processor deposits and the cash total to your bank deposit. Small differences point to fees, timing or a counting error. ## Inventory and cost of goods Cost of goods sold equals beginning inventory plus purchases minus ending inventory. If your POS tracks inventory, use its valuation report but verify it with a physical count at least once a year. Many shops count by section on a rotating basis. Record freight-in as part of cost, and treat supplies like bags and tags separately. ## Shrinkage and markdowns Shrink is the difference between the expected stock and the counted stock, caused by theft, damage, errors or vendor shortages. Record it as an adjustment and watch the trend. Markdowns and clearance sales reduce revenue but may also signal ordering mistakes. Track them by department to see where you buy poorly. ## Vendor terms and open-to-buy Vendors may offer discounts for fast payment, or require deposits on special orders. Track bills with due dates and pay on a calendar so you capture discounts without hurting cash. Consignment goods belong to the consignor until sold, so they should not sit in your inventory. Customer special orders and layaways are deposits until the customer takes the merchandise. ## Gift cards, returns and sales tax Gift cards sold are liabilities, redeemed amounts become income, and state rules for unredeemed balances vary, so check the unclaimed property rules. Returns reduce sales and may return items to inventory. Sales tax collected is a liability and should reconcile to your return each period. Food, clothing and other categories may be taxed differently depending on the state, so confirm with the tax agency and set POS tax categories accordingly. Review a monthly gross margin by department and compare it with last year, as that figure shows how your pricing and buying decisions are performing. ## Seasonality and cash planning Most stores earn a large share of profit in a few weeks of the year. Plan purchases and payroll against last year's sales by month, and arrange financing before the buying season starts, not during it. Pay attention to inventory turnover, which is cost of goods sold divided by average inventory. Slow items tie up cash and may need a markdown early, when it hurts less. Separate the roles of ordering, receiving and paying for merchandise where staffing allows. Check each delivery against the purchase order, count cash with two people, and review voids and discounts by employee. Such controls cost little and reduce shrink more than any software feature does. Keep your lease, sales tax account details and insurance information in one place for quick access. ## Worked example with numbers A boutique starts the month with $20,000 of inventory at cost, buys $12,000 more and counts $21,500 at month end. Cost of goods sold is $20,000 + $12,000 - $21,500 = $10,500. Sales were $26,000, so gross profit is $15,500, a 59.6% margin. If the point of sale system showed expected inventory of $22,300 but the count found $21,500, the $800 difference is shrinkage to investigate. Post sales from a daily summary, not each ticket, and tie card batches and cash deposits to the summary. ## Mistakes that cost money Expensing inventory purchases instead of tracking stock. Not counting inventory, so shrinkage is invisible. Mixing gift card sales into revenue before they are redeemed. Ignoring markdowns, which lower the value of stock. ## Check your work Tie the point of sale sales report, the processor reports and bank deposits each week. Compare book inventory to a count at least once a year. ## Common questions **How often should I count inventory?** At least annually for tax and financial statements. A rotating partial count monthly helps catch problems earlier. **Can I deduct inventory when I buy it?** Generally it becomes cost of goods when sold. Ask a CPA about small business rules that may apply. This guide is general information, not tax, legal or accounting advice. Rules, fees and due dates change; check with the IRS, the NJ Division of Taxation or a licensed professional for your situation. Let us handle it [### Monthly bookkeeping Categorizing, reconciling and monthly reports, with cleanup, payroll and NJ filings available. Bookkeeping →](/bookkeeping/) [### Square, Stripe and payment processors How sales from Square, Stripe, PayPal and other processors should flow into your accounting software, and why deposits never match sales. Square & Stripe →](/bookkeeping/software/square-and-stripe)[### QuickBooks Online Monthly bookkeeping, cleanup and reconciliation in QuickBooks Online for New Jersey small businesses. Your account stays in your name. QuickBooks →](/bookkeeping/software/quickbooks-online) More guides - [Law Firm Bookkeeping and Trust Account Basics](/bookkeeping/guides/law-firm-bookkeeping-and-trust-accounting) - [Bookkeeping for Independent Insurance Agents](/bookkeeping/guides/bookkeeping-for-insurance-agents) - [Bookkeeping for Gyms, Studios and Personal Trainers](/bookkeeping/guides/bookkeeping-for-gyms-and-fitness-studios) - [Bookkeeping for Landscaping and Lawn Care Companies](/bookkeeping/guides/bookkeeping-for-landscaping-companies) Free tool - [Bookkeeping health check](/bookkeeping/health-check) [All guides](/bookkeeping/guides) Reach small business owners, freelancers and bookkeepers who read this guide: [advertise here](/advertise#bookkeeping). Do it yourself ### Inventory Tracker and Reorder Workbook Log what comes in and goes out and see what you have, what it is worth, what to reorder and what has not sold. [See what's inside ($34)](/toolkits/inventory-tracker-reorder-workbook)14-day full refund Tallyfinch ### Books you keep on your own computer Tallyfinch does invoices, bills, bank import, reconciliation and the main reports, in a file you own. $99 once, then $5 a month for updates; the app keeps working if you stop the plan. It does not do payroll or sales tax filing. The free download records up to 60 entries. [See Tallyfinch](/bookkeeping/mcc-books-downloadable-bookkeeping-software) [Download it free](/tools/pro/trial/mccBooks) [Compare the three apps](/software) ## Rather have us keep the books? Ask for a quote. [Get a Quote](/bookkeeping/#interest)[Call (908) 444-6373](tel:+19084446373)