Book inventory refers to the inventory quantity and value recorded in the books of accounts or inventory records of a retail organisation. It represents the stock that, according to the retailer’s records, should be available at a particular point in time. Book inventory is generally calculated by taking the opening inventory and adding purchases and other additions to stock, while deducting sales, returns, shortages, damages, and other reductions. It is an important tool for controlling merchandise, evaluating stock performance, preparing financial statements, and identifying differences between the recorded stock and the physical stock available in the store. In retailing, inventory consists of merchandise purchased for resale. Since retailers normally handle a large number of products with different costs and selling prices, maintaining an accurate record of inventory is essential. Book inventory provides a continuous picture of the expected stock position. For example, if a retailer starts the month with merchandise worth ₹5,00,000, purchases merchandise worth ₹3,00,000 and records sales at cost of ₹4,00,000, the expected closing book inventory would be ₹4,00,000, assuming there are no other adjustments. Physical stock may later be counted to determine whether the actual inventory agrees with the book inventory. The retail method of inventory valuation is a technique used by retailers to estimate the value of ending inventory. Under this method, inventory is valued by converting its retail selling value into cost value through the use of a cost-to-retail ratio. The method is particularly useful for retailers who maintain a large variety of merchandise with different costs and selling prices. Instead of determining the individual cost of every item remaining in inventory, the retailer estimates the cost of ending inventory based on its retail value. The basic principle of the retail method is that merchandise is maintained at both cost and retail values. Cost represents the amount paid by the retailer to acquire the merchandise, while retail represents the price at which the merchandise is intended to be sold to customers. The relationship between these two values is expressed through the cost-to-retail percentage. The formula is: Cost-to-Retail Ratio = Cost of Merchandise Available for Sale ÷ Retail Value of Merchandise Available for Sale × 100 After determining the cost-to-retail ratio, the retailer calculates the estimated ending inventory at retail and multiplies it by the cost-to-retail ratio. Estimated Ending Inventory at Cost = Ending Inventory at Retail × Cost-to-Retail Ratio The retail method involves several important steps. First, the opening inventory is recorded at both cost and retail values. Second, purchases during the period are added at both cost and retail values. Third, other adjustments such as freight, purchase returns, markdowns and markups are considered according to the particular retail inventory method being used. Fourth, the cost-to-retail ratio is calculated. Finally, the ending inventory at retail is multiplied by the cost-to-retail ratio to estimate the inventory value at cost. For example, suppose a retail clothing store has opening inventory costing ₹2,00,000, with a retail value of ₹3,00,000. During