We explain what an inventory is and how this asset register is composed. In addition, the types of inventory that are usually used.
What is inventory?
Inventories are real and concrete assets, that is movable and immovable property. These form the commercial flow of a person or a company . These goods are for sale, hence the commercial nature, or for the consumption of goods and / or services. Inventories are made in a certain period of time.
If a company is commercial, its livelihood is always buying and selling, that is, the exchange of goods and services. With the inventory, the company has an exhaustive control of merchandise during the commercial period, and at the end of it it has the “final balance”, that balance is comparable with that of other years and serves to draw conclusions and from there take certain actions depending of the result. When the goods are being counted for a certain economic period, it is necessary that they appear in the “Current Assets” group, this means that it is all merchandise at the cost that is in the hands of a company.
The concept of inventory has to do with accounting , which is a system for controlling and recording profits ( income and expenses), as well as economic operations, in this case carried out by a company or association, it reflects the financial movements that they make.
The direct relationship between inventory and accounting is the core of commerce . The aforementioned companies as commercials must without a doubt have a tenacious control in their operations, the inventory provides summary and also specific information on the actions of purchase and sale of goods or services.
Concrete information has pillars on which it is based. For example, each inventory has inside:
- The initial inventory, there begins to place the valuation of the merchandise that is had when the accounting period begins.
- Purchases represent merchandise acquired by the company in order to market it.
- Returns and purchase expenses.
- Sales are the transfer, in this case, of a good to another person after payment of an already agreed price.
- Sales Returns
- Merchandise in transit (those that are on the way to the company but have not arrived yet).
- Goods in consignment that do not belong to the company, and finally
- The final inventory, which is a comparative analysis of the merchandise at the beginning of the period and at the end of the period, where it yields profit and loss results.
Types of inventories
Although it is not the same inventory for all types of companies, inventories vary depending on the specialty or particularity of each company. Not all are dedicated to the same and that is why they have an inventory according to their merchandise. Some are dedicated exclusively to the sale of processed products and these correspond to inventories of finished products .
Different is an inventory of raw materials , which are the elements that once processed will be a product. There are products that are not in a state of raw material or of finished product, they are in an intermediate process, that is to say that they are being carried out or being formed, and to them a specific inventory corresponds, in this case the inventory of products in manufacturing process.