[Commerce Class Notes] on Meaning and Classification of Inventory Pdf for Exam

Inventory means in Accounts all the goods, items, materials, and merchandise that are held by a business so that it can sell them in the market and make a profit from them. The term inventory also refers to one of the major important factors of the business called the asset because they are the major turnover of the inventory. Inventory is also the primary source of the subsequent earnings and revenue generation that are available for the stakeholders of the company. Inventory refers to the finished goods that are held by any company.

Inventory And Its Types

Inventory is mainly categorized as work-in-progress, raw materials, and finished goods.

Raw materials refer to the various unprocessed materials that are used to make goods. Some of the examples of raw materials are steel and aluminium used for making cars, flour which is required for the production of bread in a bakery, and oil that are held by various refineries. 

Work-in-progress inventory refers to the goods that are finished partially and have been kept for resale and completion. The term is also known as the inventory present on any work floor. Examples include a yacht that is partially completed or an airliner that is half-assembled.  

It also refers to finished products that are the products already completed and are ready for marketing. They are ready for selling purposes and can be used by the consumers who purchase them. This inventory is also known as merchandise. Examples of such inventory include cars, furnished products, clothes, and electronics.

Inventory in Economics

Inventory plays an important and efficient role in the trading and manufacturing business and so the businessman needs to understand the importance of economics in the growth of an inventory. The inventory should be processed well to produce more products that result in the positive growth of the company.

Indirect Inventory 

It refers to the stock items necessary for the production of goods but they are not the direct component of those goods or products. Such goods can be ancillary goods that refer to the situation where the company cannot link them with final units of the finished goods. These indirect inventories form the distribution, selling as well as administrative purpose. The examples include oils and petrol that are used in indirect inventories. Office supplies also fall under indirect inventories. 

Live Inventory Meaning

Live inventory helps an individual to easily handle all the multiple channels by checking that they are up-to-date as well as accurate. This also refers to the selling process by increasing sales, stopping oversell, and giving confidence.

Inventory Means in Account 

Inventory accounting refers to the accounting that deals with the accounting and valuation changes that can be introduced in the inventoried assets. The inventory of a company generally deals with goods that involve three stages of production. Inventory accounting assigns values to all the items in the three stages and prepares them for sale. 

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