Inventory accounting is an important part of the accounting of a company engaged in foreign, wholesale and retail trade. This is because inventories are an important part of the assets with the characteristics of the described companies.
Inventories are the material goods, raw materials, products in process, finished products, among others, that a company owns for the generation of income flows from this activity. A proper accounting ensures the proper allocation of their prices.
IMPORTANCE FOR THE DETERMINATION OF THE VALUE OF INVENTORIES
It is important for a company to determine the value of its inventories and thus be able to calculate the cost of goods produced or in some cases purchased already finished for re-export or retail sales. In addition to inventory accounting, a company must also have a system of inventories, which should have a reference number for quick location in the system, where you can see their selling prices and availability in their systems or inventory or accounting programs, and should be the same as those available in the warehouses where the products are located. You can also measure their rotation so that management can make decisions on how to continue managing these inventories or bet on the marketing of these products to accelerate their rotation.
An inventory system is a set of procedures and policies used to control a company’s inventories. This includes recording inventories, tracking inventories, random month-end sampling of inventory for accuracy, ensuring that inventory does not deteriorate, and managing inventories such as those on hand so that they are not mixed with separate inventories for the next shipment.
Having a good inventory system in place allows a company to control inventory in an efficient manner. Some companies invest in systems and processes that mitigate shortages and misdeliveries that significantly impact the cost of goods sold.
Another aspect for a company’s inventories is to ensure that inventories are stored correctly, with location numbers to avoid errors in shipments, that they are properly tracked and that they are managed efficiently. This helps a company save time and money by maintaining proper control of its inventories.
In conclusion, inventory accounting and inventory systems are two important aspects of a company’s accounting. These two aspects help a company keep track of its inventories, control its inventories, and manage its inventories efficiently. This helps a company save time and money by keeping proper control of its inventories.