Inventory report assignments
Inventory refers to the goods and materials that a business holds for the ultimate purpose of resale or providing a service. The inventory report is a comprehensive account of the supply of these goods and materials that a company has on hand.
There are several different methods that can be used for inventory reports in accounting:
- Specific identification: With the specific identification method, you can trace the exact cost of each individual item in inventory. Usually, that’s because each item in inventory is unique or is equipped with a serial number that can be traced to its purchase price. As a result, ending inventory is the total of all payments made to the particular vendors from whom the company purchases the inventoried goods less the cost of items sold. This inventory method is used for businesses with expensive individual inventory items, such as a car dealership.
- Weighted average: When the weighted average method is used, inventory and the cost of goods sold are based on the average cost of all units purchased during the period. This method is often used when inventory is substantially the same, such as with grains and fuel.
- First-in, first-out (FIFO): Using the FIFO method an assumption is made that the oldest items in a company’s inventory are sold first even though this may not be the case. .
- Last-in, first-out (LIFO): This method assumes that the most recently purchased items in inventory are sold first even though they may not be
It is important to prepare a balance sheet and to know what method was used for inventory when you examine financial reports as the method used can significantly alter statements.
Inventory analysis uses information from reports to assist in determining the best level of inventory for a company.
Simple formulas for inventory report assignments
Inventory reports and inventory analysis can become very complex when dealing with larger businesses. While there are many complicated statistical formulas for inventory analysis there are also some simple and basic formulas that provide important information. Here are for basic formulas useful for analyzing inventory reports:
- Cost of goods sold = Cost of goods available − cost of ending inventory at the end of the period
- Cost of goods available = Cost of Inventory at the start of the period + inventory purchases within the period + cost of production within the period
- Inventory turnover = Cost of goods sold ÷ average inventory.
- Number of day’s sale in inventory = inventory at the end of an accounting period ÷ average daily cost of goods sold
An inventory report involves much more than just counting things, and the way inventory reports are used in accounting can be confusing. If you are having difficulty with inventory reports or accounting lease assignment help our service is available to assistant you.
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