Inventory

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Inventories

By Sheela Warrier MeraSkill.com Š MeraSkill


INVENTORIES


Index Terminology Business Flow Types of Inventory Why Inventory Valuation? Quiz 1 Basis of Inventory Valuation Purchase Cost Methods of Inventory Valuation Quiz 2 Accounting Records vs Cost Records Inventory Record System Stock Taking Quiz 3

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Terminology


Terminology Current Assets - assets that can be converted to cash within a year Current Liabilities- obligations that have to be met within a year Working Capital = Current Assets - Current Liabilities Liquidity - the degree of ease of conversion of an asset to cash Current Ratio = Current Assets / Current Liabilities Direct Cost - cost that can be identified with the product Overhead - indirect cost and cannot be identified with a specific product Gross Profit Margin = (Gross Profit / Net Sales) x 100 Accounting Standards- ensure uniformity in the preparationof financial statements Š MeraSkill


Business Flow


Purchase Inflow of Inputs

Purchase Market

Cash outflow on Purchase

Store

Production

Product or Services

Warehouse

Sales Outflow of Output

Sales Market

Cash Inflow from Sales

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Types of Inventory


Production Process at Home

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TRADER

MANUFACTURER

BUYS

BUYS

SELLS

MAKES

SELLS


Types of Inventory Inventories are currents assets held

for sale in the ordinary course of business

in the form of materials and supplies to be consumed in the process of production or rendering of services

in the process of production for such sale

as maintenance supplies and consumables other than machinery spares

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