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Definition of Inventory
For companies: Raw materials, items available for sale or in the process of being made ready for
Goods bought or manufactured for resale but as yet unsold, comprising raw materials, work-in-progress and finished goods.
Goods that a firm stores in anticipation of its later sale or use as an input.
The cost of the goods that a company has available for resale.
The cost of unsold goods that are held for sale in the ordinary course of business or
Those items included categorized as either raw materials, work-inprocess,
A method for dividing inventory into classifications,
The inventory cost-flow assumption that assigns the average
The beginning inventory for a period, plus the amount at the end of
A secured loan that gives the lender a lien against all the borrower's inventories.
The amount of money invested in inventory, as per a company’s
The average number of days' worth of sales that is held in inventory.
inventory intended for shipment to customers, usually
a measurement of the value of inventory for the time that inventory is held
The dollar value or unit total of goods on hand at the end of an
Goods that have been completed by the manufacturing
Completed inventory items ready for shipment to
The inventory cost-flow assumption that
Excess inventory kept on hand to provide a buffer against
Excess inventories kept on hand as a buffer against contingent
inventory currently situated between its shipment and delivery
Parts with no recent prior or forecasted usage.
A transaction used to adjust the book balance of an inventory
The number of days it would take to sell the ending balance in inventory at the
The redirection of parts or finished goods away from their intended
A transaction used to record the reduction in inventory from a location,
A secured short-term loan to purchase inventory. The three basic forms are a blanket
The arrival of an inventory delivery from a supplier or other
inventory returned from a customer for any reason. This receipt
A term describing the loss of products from inventory
A shortfall between inventory based on actual physical counts and inventory
The ratio of annual sales to average inventory which measures the speed that inventory
The number of times a company sold out and replaced its average stock of goods in a year. The formula is:
The number of times per year that an entire inventory or a
Ratio of annual sales to inventory, which shows how many times the inventory of a firm is sold and replaced during an accounting period.
inventory turnover ratio
The cost-of-goods-sold expense for a given
Inventory Turnover Ratio
Provides a measure of how often a company's inventory is sold or
Refers to making an entry, usually at the close of a
Just-in-time inventory systems
Systems that schedule materials/inventory to arrive exactly as they are
Last-In, First-Out (LIFO) Inventory Method
The inventory cost-flow assumption that assigns the most recent inventory acquisition costs to cost of goods sold. The earliest inventory
An inventory item’s budgeted maximum inventory level,
The value of the products that a retailing or wholesaling company intends to resell for a profit.
An inventory item’s budgeted minimum inventory level.
Moving average inventory method
An inventory costing methodology that calls for the re-calculation of the average cost of all parts in stock after every purchase.
The current inventory balance, less allocated or reserved items.
Parts not used in any current end product.
A physical inventory count taken on a repetitive basis.
Periodic inventory system
An inventory system in which the balance in the inventory account is adjusted for the units sold only at the end of the period.
A system that continually tracks all additions to and deletions
A manual or automated inventory tracking system in which
Perpetual inventory system
An inventory system in which the balance in the inventory account is adjusted for the units sold each time a sale is made.
A manual count of the on-hand inventory.
Raw materials inventory
The total cost of all component parts currently in stock that
The process of comparing book to actual inventory balances,
Very high inventory levels built up in anticipation of large
Parts for which the on-hand quantity exceeds forecasted
a streamlined system of inventory
The direct management and ownership of selected
inventory that has been partially converted through the
A ratio that shows how well a company could pay its current debts using only its most liquid or “quick” assets. It’s a more pessimistic—but also realistic—measure of safety than the current ratio, because it ignores sluggish, hard-toliquidate current assets like inventory and notes receivable. Here’s the formula:
actual cost system
a valuation method that uses actual direct
the amount of overhead that has been assigned to Work in Process inventory as a result of productive activity; credits for this amount are to an overhead account
The subsequent subtraction from inventory records of those parts used
a streamlined cost accounting method that speeds up, simplifies, and reduces accounting effort in an environment that minimizes inventory balances, requires
A transaction to move inventory from one storage bin to another.
The reintroduction of a faulty product into a process production flow by
the total variable cost of carrying one unit of
The cost of holding inventory, which can include insurance,
Cash conversion cycle
The length of time between a firm's purchase of inventory and the receipt of cash
Cash Flow Provided by Operating Activities
With some exceptions, the cash effects of transactions
Change in Accounting Estimate
A change in the implementation of an existing accounting
cost of goods manufactured (CGM)
the total cost of the
Typically the cash, accounts receivable, and inventory accounts on the
Cash, things that will be converted into cash within a year (such as accounts receivable), and inventory.
Amounts receivable by the business within a period of 12 months, including bank, debtors, inventory and prepayments.
The frequent, scheduled counting of a subset of all inventories,
Measures the number days' worth of sales in accounts receivable (accounts receivable
The informal and frequently unauthorized retention of excess inventory on the shop floor, which is used as buffer safety stock.
inventory that has been physically marked as being for a
economic order quantity
Order size that minimizes total inventory costs.
Economic order quantity (EOQ)
The order quantity that minimizes total inventory costs.
economic order quantity (EOQ)
an estimate of the number
economic production run (EPR)
an estimate of the number
FIFO (First In, First Out)
An inventory valuation method that presumes that the first units received were the first ones
FIFO method (of process costing)
the method of cost assignment that computes an average cost per equivalent
The accounting period adopted by a business for the production of its financial statements.
First in, first-out costing method (FIFO)
A process costing methodology that assigns the earliest
A method of valuing the cost of goods sold that uses the cost of the oldest item in
First-in, first-out (FIFO)
A method of accounting for inventory.
First-in, first-out (FIFO)
An inventory valuation method under which one assumes that the
An inventory storage technique under which permanent
Arrangement used to finance inventory. A finance company buys the inventory, which is then
Low-cost, high-usage inventory items stored near the shop floor,
the amount of time spent in storing inventory or
internal accounting controls
Refers to forms used and procedures
The movement of inventory from one company location to
job order cost sheet
a source document that provides virtually
just-in-time manufacturing system
a production system that attempts to acquire components and produce inventory only as needed, to minimize product defects, and to
A method of valuing inventory that uses the cost of the most recent item in
Last-in, first-out (LIFO)
An inventory costing methodology that bases the recognized cost of
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