Taking a Look at Inventory Management

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Introduction
Inventories are those asset items which are either used for the production of goods to be sold or used directly for the purpose of sales. It is a major portion of current assets and thus there is need to do careful investment in the same. Different kind of companies has different forms of inventory. For example; a company that is into direct selling of readymade goods will have only merchandise inventory in their accounts while the manufacturing companies will have inventory in three forms i.e. raw materials, work in progress and the final or finished product. The inventory at different stages plays different roles like the raw materials are that inventory which is used for the production of goods for selling purpose. Work in progress is that inventory which is in production, i.e. goods in production for sale and the final or finished product is that inventory which is ready for sale .
Balance Sheet Format
Thus, the Balance Sheet format of the two companies would look like:
Balance Sheet for Merchandising Company
Particulars Amount
Current Assets
Bills Receivables
Inventories
Prepaid Expenses
Cash

Balance Sheet for Manufacturing Company
Particulars Amount
Current Assets
Bills Receivables
Short term investments
Prepaid Expenses
Cash
Inventories Finished Goods Work in Process Raw Materials Packaging Materials Total Inventories
Valuation of Inventories
As per the valuation of inventories requires considering a lot
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