Because inventory is bought through cash or bank balance. Both bank balance and cash are the part of current asset. With this, we bought inventory, so, inventory is also our current asset in our balance sheet.
If company is manufacturer of any product, then his inventory will be also part of current asset. There is no issue regarding its position or section in balance sheet but we can classified these inventory into three parts. One is raw material, second is work in process and third is finished goods. We will show all these in inventory by calculating its closing stock's value by using FIFO, LIFO and other inventory cost calculation methods.
If your company is doing trading of any product, ending merchandise inventory will also be shown in current asset just after account receivables. In trading company, current assets will shown on the basis of liquidity. Cash will first, then short term investment, then account receivables and then will come inventory.
If company is manufacturer of any product, then his inventory will be also part of current asset. There is no issue regarding its position or section in balance sheet but we can classified these inventory into three parts. One is raw material, second is work in process and third is finished goods. We will show all these in inventory by calculating its closing stock's value by using FIFO, LIFO and other inventory cost calculation methods.
If your company is doing trading of any product, ending merchandise inventory will also be shown in current asset just after account receivables. In trading company, current assets will shown on the basis of liquidity. Cash will first, then short term investment, then account receivables and then will come inventory.
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