Inventory Cost Flow Assumptions
In This Chapter
Taking a big-picture look at inventory management
Understanding the difference between merchandising and manufacturing inventory
Looking at inventory valuation methods
Dealing with special inventory costs
Calculating the value of ending inventory
Handling stale inventory
For manufacturing and merchandising businesses, inventory is probably the most significant current asset. Accounting for inventory isn’t as simple as just placing orders for merchandise, recording the value at cost, and reducing inventory balances by sales. Accountants also have to consider different cost flow assumptions and ending inventory valuation issues.
Adding to the confusion is the fact that there are different types of inventory. Some people think inventory is only the merchandise available for sale in a store. I discuss that kind of inventory (called ...