Define inventory items in a way most useful to you, including types of items, serial or reference numbers, and condition. You'll be able to see the life cycle of any item.
Once you have added items to your inventory you can start assigning them to people. Record to whom and when it was assigned as well as the condition of the item at checkout and return time.
Cut Time has a handy Repair Request feature that lets people alert you when problems arise with instruments or inventory items.
Because all history associated with an item is tracked, you have a complete picture of your inventory: purchase date, who had it when, the condition it is in now and when it should be retired.