inventories What are the relevant documents❓

inventories What are the relevant documents❓

📌 Meaning of the word “Inventory”

Meaning of inventories In accounting, assets are held by an entity for sale. or it may give a more detailed meaning that Inventory is “finished goods Work or work in process, raw materials and materials used in the production for sale in the ordinary course of the business.

- Existence and Completeness Inventories shown in financial statements must be real. and does not show a higher value than reality This is because the number of inventory accounts affects the cost calculation. because if the inventory at the end of the period is shown to be inflated This will cause the business to show an inflated net profit as well. Therefore, the existence of the product is something that the inspector must focus on. especially if the business has many warehouses or there is a risk that the products in the account may not match the actual products, such as storage in other people's warehouses Business selling products by consignment and consignment business, etc.

- Ownership business and has liabilities on goods (Rights and Obligations) in addition to checking whether the goods are real or not Auditors must verify that the entity has ownership. in the products that appear in the financial statements as well Especially if the business has goods in transit, consignment and made to order products. Ownership has to be carefully monitored. In addition, the auditor must verify that the entity has obligations to pay for the goods.

- Measuring the value of goods in the financial statements (Valuation) to verify that the values presented in the financial statements are correct. Auditors should examine the following issues:

1) Purchased raw materials and inventories Shown with the cost of purchase from the seller. deducted by the estimated amount that will be discounted and add with the shipping cost to be paid

2) The cost accounting system is suitable for transferring raw material prices. Labor costs and factory expenses are accounted for production costs.

3) Cost accounting system is suitable for displaying production costs. and make the calculation of the product price during production appropriate

4) An entity uses generally accepted accounting methods for transferring costs into production costs.

5) Inventories must be valued in accordance with generally accepted accounting principles. especially slow selling products and obsolete, the price in the financial statements should be not higher than the net realizable value.

- Listing of inventories in financial statements and disclosures (Presentation and Disclosure) Inventories must be presented in the balance sheet as a separate item under current assets. and details of various types of inventories are also included in the notes to the financial statements such as finished goods products in process raw materials and materials Factory supplies may be included with raw materials or included as an upfront cost. In addition, the notes to the financial statements show the valuation criteria. Inventory Account Method and if inventories are used as collateral for liabilities, this obligation must also be notified.

📌 Documents related to inventories

Business owners have to manage after placing an order for sale, including:

1. invoice or delivery note

2. Tax invoice

3. Receipt

4.Stock card

5. Inventory and raw material report

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