Chapter 1 – Inventory


Inventory represents one of the most important assets of a business because the turnover of inventory represents one of the primary sources of revenue generation and subsequent earnings for the company’s shareholders

1) What is Inventory?
Inventory is
a)raw materials, works-in-progress and finished goods
b)For own production to be ready for sales
c)Assets to the company 

2) Breaking Down of Inventory
The basic formula for determining the cost of goods sold in an accounting period is:
Beginning inventory + Purchases – Ending inventory
= Cost of goods sold

Thus, the cost of goods sold is largely based on the cost assigned to ending inventory,

3) Sample of Cost of Goods Sold as per Autocount Profit & Loss

4) Sample of Closing Stock as per Autocount Balance Sheet


1) 5 components for Manufacturing :-
a) Raw materials- used in the production as a source material. Examples :- metal bought by car manufacturers and food ingredients held by food preparation companies.
b) works-in-progress (Semi Finished Goods)– goods that are in the process of being transformed during manufacturing and are about to be converted into finished goods.
c) Finished Goods– products that have gone through the production and ready for sale.
d) Packing Material- products used for packing of Goods
e) MRO Goods– stands for maintenance, repairs and operating supplies. They are also called as consumables in various parts of the world. Maintenance and repairs goods like bearings, lubricating oil, bolt, nuts etc are used in the machinery used for production.

2) 1 components for Trading :-
a) Merchandise/Trading Inventory- Trading Goods
Retailers who buy and resell goods typically call inventory “merchandise,” which includes finished goods bought from producers and can be resold immediately.
Examples of merchandise include electronics, clothes and cars held by retailers.

3) Others Tyre of Inventory :-
a) Good In Transit: transports raw materials, WIP, finished goods etc from one site to other for various purpose like sales, purchase, further processing etc. Due to long distances, the inventory stays on the way for days, weeks and even months depending on distances. Goods in transit may consist of any type of basic inventories.