Accounting Demystified

Chapter 8. Inventory

Inventory is the goods that companies sell. Companies that provide services and do not sell goods do not have inventory. For those companies that manufacture goods or purchase them for resale, managing inventory is an important part of operations. Inventory is often a company's largest current asset. If the inventory can be sold, it is a good thing; if the inventory is unwanted, it is a real bad thing. Any parent can remember trying to get his or her child a ''hot'' toy such as Tickle Me Elmo, Teenage Mutant Ninja Turtle Action figures, or a Mighty Morphin Power Ranger, only to find the stores sold out. A couple of months later, the stores are overstocked and these items are being sold at a huge discount. Matching supply ...