What is inventory?
Inventory is a company’s accounting for goods, component parts, and raw materials used in production or sold. In order to guarantee that you have adequate stock on hand and identify when there’s a shortage, as a business leader, you must practice inventory management.
The word inventory refers to the process of counting or listing items. Inventory, as an accounting term, refers to all stock in the various production phases and is a current asset. Retailing and manufacturing can both maintain their business by keeping inventory. Inventory is a major asset for most businesses. However, while there is an inventory on the balance sheet, it may become a real liability if you have too much of it.
An inventory process records the creation, storage, management, and withdrawal or usage of inventory as a work in progress. The lifecycle of items and raw materials is essentially what the inventory procedure is about.
The act of counting items in storage or a warehouse is referred to as an inventory count. The condition of goods is also checked during an inventory count. Inventory counts are used to measuring assets and obligations for accounting purposes. That information may be utilized by inventory managers to calculate stock requirements and manage budgets.
The number of times a firm sells or utilizes an item in a certain period is known as inventory turnover. The quantity can reveal whether there is too much stock on hand.