See inventory: work-in-process (WIP).
See inventory: work-in-process (WIP).
An actual count of the goods owned by the business.
This indicates (on average) how many days it takes to sell the merchandise held in inventory. To learn more, see Explanation of Financial Ratios.
See direct materials inventory.
The ABC inventory system is different from activity-based costing. The ABC inventory system is used in order to focus on the most important items in inventory. Usually a relatively few items will account for a very...
A general ledger inventory account that has a credit balance instead of an asset’s usual debit balance. An example is the account Reduction of Inventory to Net Realizable Value.
See inventory: finished goods.
Inventory that is less than the expected amount. It might be associated with theft or damage.
See inventory: work-in-process (WIP).
The current asset which reports the cost of a retailer’s, wholesaler’s, or distributor’s goods purchased to be resold, which have not yet been sold as of the balance sheet date.
See inventory carrying costs.
What is obsolete inventory? Definition of Obsolete Inventory Obsolete inventory refers to products that a company had purchased or produced which cannot be sold. The obsolete items may be the result of one or more of the...
This ratio relates the costs in inventory to the cost of the goods sold. To learn more about this ratio, see Explanation of Financial Ratios.
That component of a product that has not yet been placed into the product or into work-in-process inventory. This account often contains the standard cost of the direct materials on hand. A manufacturer must disclose in...
See Explanation of Inventory and Cost of Goods Sold.
See inventory: finished goods (FG).
The average amount of inventory during a period of time. Since the amount reported in the Inventory account is the ending balance on one specific day, it is necessary to compute an average balance when relating this...
The dollar amount associated with the goods in a company’s inventory. Initially the cost per unit is the cost to get the inventory items in place and ready for use. However, under certain circumstances the cost may...
Generally, this rule requires that the cost flow assumption used for tax purposes be the same cost flow assumption used for the financial statements. Consult a tax professional about this and other tax matters.
The cost to hold an item in inventory. Includes the cost of capital tied up in inventory, the cost of space and insurance, and the cost of items becoming obsolete while being held in inventory. This is an important...
See inventory: work-in-process (WIP).
What is inventory shrinkage? Definition of Inventory Shrinkage Inventory shrinkage is a term to describe the loss of inventory. The shrinkage could be the result of theft, breakage, poor recordkeeping, etc. The term...
What is inventory? Definition of Inventory Inventory is a very significant current asset for retailers, distributors, and manufacturers. Inventory serves as a buffer between 1) a company’s sales of goods, and 2) its...
See weighted-average cost flow assumption and moving-average cost of inventory.
A part of a manufacturer’s inventory that includes direct and indirect materials. Also referred to as stores.
One component of a manufacturer’s inventory. Sometimes referred to as Stores or Raw Materials. (Other components of a manufacturer’s inventory are work-in-process and finished goods.)
This phrase has two connotations. One is the cost of holding inventory. In this case the carrying cost is the cost of capital tied up in inventory, the cost of storage, insurance, and obsolescence. Often this is...
Our Explanation of Financial Statements provides you with the highlights of each of the five external financial statements issued by U.S. corporations. Our insights will give you a good understanding of what the...
of the purchases were added to inventory. (This is an alternative to the method used in introductory accounting textbooks, which is: beginning inventory of $100,000 + net purchases of $300,000 = $400,000 of cost of...
A reduction in the cost of goods purchased that is granted by a supplier without the physical return of the goods. Also a general ledger account in which the purchase allowances are recorded under the periodic inventory...
A reduction in the cost of goods purchased that is allowed by the supplier based on the authorized return of goods. Also a general ledger account in which the purchase returns are recorded under the periodic inventory...
In estimating the ending inventory under the retail method the cost ratio is the cost of goods available divided by the retail value of the goods available.
amount, since reducing inventory has a positive effect on the company’s cash balance.) Additional Information The change in the inventory is reported as an adjustment to the company’s net income in the cash from...
inwards is considered to be part of the cost of the items purchased. Hence, for inventory items carriage inwards will be part of the cost of the goods available, the cost of inventory, and the cost of goods sold....
in accounts receivable, inventory, accounts payable, and most other current assets and current liabilities. The direct method for reporting the cash from operating activities lists the following: the amounts collected...
A rolling budget adds a future accounting period’s budget to replace a budget for an accounting period that has past. For example, a company’s 2024 annual budget will become a rolling budget if in February...
Often a 1% or 2% discount that a buyer may deduct from the amount owed to a supplier (if stated on the supplier’s invoice) for paying in 10 days instead of the customary 30 days. The purchase discount is also...
A reduction of a markup. In the retail method of estimating inventory, it could mean the elimination of part or all of the additional markup. For example, if an item with a cost of $10 would normally be priced at $15,...
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