Definition of Inventory

Definition of Inventory

inventories It is a product that the business is intended for, whether it is a finished product. Products in the production pan materials, including raw materials used in the production of goods

Things to consider when checking inventories

1. The product exists and must be complete if (Existence and Completeness)

In the inspection of goods in the warehouse, it must be done with due diligence in order to know whether the number of inventories is the same as those shown in the financial statements or not. Because if the numbers are inaccurate, it will directly affect the cost calculation. Therefore, product inspection is very important, especially in the case of multiple warehouses. Or having a consignment, etc., need to be extra careful.

2. Ownership of rights and liabilities of goods (Rights and Obligations)

No less important is to verify that the operator also owns the ownership of the goods shown in the financial statements. Including the liability of the product that the operator has to pay as well

3. Measurement of the value of goods appearing in the financial statements (Valuation) Issues that will be used to verify the values appearing in the financial statements are as follows:

- The price of the purchased raw material and the remaining material removed must be shown by the amount to be discounted. and add additional shipping costs

- There is an appropriateness between the cost accounting system and the transfer of raw materials, labor and factory expenses.

- The cost system is related to the production cost display. which makes it suitable for calculating the price of the product during production

- For the transfer of production costs, the operator must use generally certified accounting.

- In valuation of inventories must be in accordance with generally accepted accounting principles. For example, slow selling products must be presented in the financial statements, not taking away from the net worth.

4.Display of inventories in financial statements and disclosures (Presentation and Disclosure)

To show inventories must be separate under current assets on the balance sheet. It is necessary to include details of inventories in each category in the invoice in the notes to the financial statements. The notes to the financial statements must specify. Inventory Account Method valuation criteria and the debt burden of the product, if any

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