Inventory valuation - Introduction

Inventory Valuation Introduction

Why is Inventory Valuation Important? ,[object Object],Balance Sheet Inventory is listed in the Current Assets section of the Balance Sheet. Cost of Sales The inventory value is the basis for the Cost of Sales on the Income Statement. Current Assets Raw Materials 1,000,000.00 Work in Process 500,000.00 Finished Goods 300,000.00 Gross Inventory 1,800,000.00 ,[object Object],-150,000.00 Net Inventory 1,650,000.000 Income Statement Sales 1,000,000.00 Cost of Sales -450,000.00 Gross Income 550,000.00

Inventory Valuation Regulations ,[object Object],[object Object],[object Object],[object Object]

Flow of Inventory ,[object Object],Manufacturing Activity Debit Credit Receipt of Item Inventory Cash (or Accounts Payable) Sale of Item Cost of Sales Inventory Activity Debit Credit Receipt of Raw Materials Raw Materials Goods Received, Not Invoiced Issuing Raw Material to a Job ,[object Object],Raw Materials On Payment Goods Received, Not Invoiced Cash (or Accounts Payable) Upon Job Completion ,[object Object],[object Object],Upon Sale ,[object Object],[object Object]

Who Owns the Inventory? ,[object Object],[object Object],[object Object],[object Object],[object Object]

The 80/20 Rule for Inventory ,[object Object],[object Object],[object Object]

Inventory valuation - Introduction

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Inventory valuation - Introduction