Abstract: A method of tracking medical surgical instruments using encoded radio frequency tags incorporated in labels which are affixed to each instrument. A database of instruments is maintained at a hospital which may contain identification and status information for each instrument. A standard data format is used in the tags to provide a universal inventory system for medical institutions, medical instrument manufacturers and service companies. The tags may be instantly identified by a microprocessor system having a radio frequency scanner. The scanner may optionally write data to a radio frequency tag. A method of accounting for instruments used in a surgical procedure by performing an electronic radio frequency scanning inventory before a procedure and again before a surgical cavity is closed.