inventory

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ENSO LOUIS JEAN
ENSO LOUIS JEAN's picture
inventory

hi,

There rare three types of inventory :
Inventory of raw materials - materials from which the company prepares (manufactures) the products that it sells.
Inventory of products being processed - products that are still in the manufacturing process.
Inventory of finished products - products ready for sale that are waiting for a customer.

It says that inventory of products being processed is usually negligible then why there is a reference in to that the financial statements ?

thanks

Jason Pride
Jason Pride's picture

Hi Enzo,

The financial statements need to be as accurate as possible, so if there is any significant inventory it needs to be included. In the examples shown throughout the course there may be negligible amounts shown for completeness. In actuality, how and when inventory is reported will depend on the choices the firm makes for inventory management. However, once a firm chooses one style of inventory tracking they are expected to maintain it from year to year for reporting purposes.