However, the inventory and cost of goods sold balances can vary dramatically in any given period. The LIFO Reserve To overcome this issue, many companies maintain their internal records using FIFO, weighted average cost but external reporting using LIFO for income tax
The first step is identify the value of the goods in the inventory and then value the goods with the accounting practices which is last in/last out basis (LIFO), first in/ first out (FIFO) basis and average cost. Cost of goods sold is one of the most relevant measures for inventory decision making. Last in/last out (LIFO) can be defined as selling the latest goods that are purchased lately first then only sell the goods that have been purchased before while first in/first out (FIFO) means that selling the goods that have been purchased first then only sell the goods that purchased
4. What inventory method is used to value inventories? Does this method reflect current cost at year-end? The inventory method of FIFO(First In First Out) is used to value inventories. However, this cost is matched with the lower cost and market cost from both of them is applied to the compute of inventory
Hence, in order for an inventory management system to perform effectively and efficiently, they should have features that help define certain qualities and characteristics of the product or service. There are nine (9) key or most requested features that should be included within any inventory management system; supported by a survey conducted by Software Advice - a leading online advisor and research company (Hodges, 2017). Here are some key features inventory management
Hung , published a paper to compare the interior local minimum and the boundary local minimum. In2015, Serhii ZIUKOV , proposed literature review on models of inventory management under uncertainty. Inventories are raw materials, work-in-process goods and completely finished goods that are considered to be the portion of business’s assets that are ready for sale. Formulating a suitable inventory model is one of the major concerns for an industry. Some literature analyzes possible parameters of existing models of inventory control.
2.2.1. Price Inventory valuation depends on price and quantity; Price is the first element for valuation of inventory. Price covers two issues. First issue is compliance with established law of the country. Second issue is associated with manner of calculation.
First In First Out (FIFO) means first order should deliver first and after that continue process. It is good way of delivery that make the customer satisfied. Every inspection about available stock is on SAP every one can know how much stock is available, and how much order should be placed. For every order they keep the numbers for identification. Warehouse arrangement There is separate warehouse for keeping the different types of inventory like Raw material, packaging material, semi finished good and finished good.
Inventory management performs a significant function in maintaining specific operating requirements for a business (Stewart, 1997). Inventory involves taking stocks for a business to sustain its operation and meet consumer demands. It is considered as one of the most valuable assets because the turnover of inventory represents the primary sources of income and earnings for the company (Shue, Chen, & Shiue, 2009). Maintaining a specific level of inventory is vital because high level inventory and stock out significantly affects the profitability of the business. Possessing high level of inventory for a long period of time tends to increase operating cost due to inventory storage, dead stocks or items that are not selling, and spoilage costs of perishable items.On the other hand, stock out or failure to maintain adequate amount of product supply affects customer satisfaction which might lead to disappointments of potential customers and opportunity to lost
It focuses on the sources and uses of cash through operating, investing and financing activities. Activities that result in the receipt of cash are cash inflows, and activities that result from the spending of cash are cash outflows. SEE APENDIX III STATEMENT OF FINANCIAL POSITION also known as the balance sheet presents the financial position of an entity at a given date. It is comprised of three main components: Assets, Liabilities, and Equity. Statement of financial position helps users of financial statements to assess the financial soundness of an entity in terms of liquidity risk, financial risk, credit risk and business risk.
Moreover, stock investors use these statement to make a decision about whether they want to invest the business because earnings underlie a company’s ability generate cash flows for dividends and growth. Owners also is one of the user of income statement. They use the income statement to make important long-term business decisions. For example, whether or not to continue or discontinue part certain equipment in the production of its goods. Lastly, accountants use these statement to prepare tax returns for both individuals and