Taking a Look at Inventory Management

1209 WordsFeb 4, 20185 Pages
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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