Inventory

What is an inventory?

An inventory is a set of movable and immovable property that belongs to a company, for a specified period of time, and that are intended for sale, consumption, rental or transformation depending on the purpose of the company.

From an accounting point of view, inventory is a current asset, meaning that it It is part of the organization's assets; therefore it can be valued, ordered and accounted for in order to keep track of the flow of said goods.

In this way, an inventory can also be defined as the detailed and orderly record of the elements that make up the assets of a company on a certain moment.

Inventory characteristics

In the business context, the characteristics of inventories are as follows:

• All information pertinent to the inventory must be recorded to obtain adequate monitoring of entries and exits. For this, there are accounting books and specific documents, such as the Kardex.
• Records made must include detailed description of each of the elements that make up the heritage.
• All inventoried goods or items must be valued using the monetary units corresponding.

Types of inventories

Inventories can be classified in different ways as they are recorded, valued, and accounted for.

The most common classification follows the level of completion of products. This allows knowing the number of units available in each phase of the production process.

Inventory of raw materials

This inventory consists of all raw materials required for the production of the products, but which are still in their original state. In other words, they have not been subjected to any type of processing or transformation.

Inventory of products in the manufacturing process

It's conformed all acquired goods that have already started their transformation. These are at some point in the manufacturing process, but have not yet been completed. Your valuation considers the amount of materials used, the labor and the manufacturing costs incurred up to that point.

Inventory of finished products

In this point, the acquired goods have already gone through the entire transformation process and they are ready for commercialization as finished products. Thus, they add up the total cost of production in terms of raw material, labor and other manufacturing costs.

Factory supply inventory

In every manufacturing process there are indispensable materials for the transformation process, but that cannot be accurately quantified. These are known as factory supplies and they influence the process just as much as labor or raw materials.

Among the items that usually make up this type of inventory, the following stand out: paint, sandpaper, nails, lubricants, glue, among others.

Inventory of merchendise

This type of inventory is typical of commercial companies, which unlike manufacturing companies, They buy finished products and then sell them, without modifying or transforming them previously.

Consequently, they will only have inputs (purchases) and outputs (sales) on a single stock, commonly named as inventory of merchendise. In some cases, this may be supplemented by inventories of merchandise on the way or inventories of merchandise on consignment, to name a few.

Other types of inventory

Although the classification described above is the one most used by companies, it is important to bear in mind that there are other types of inventories. These can be equally useful to assess the stock of available goods, optimize logistics processes, among others.

According to this, we can mention the following classifications:

• Physical inventory.
• Minimum inventory.
• Lot size forecast inventory.
• Inventory available.
• Online inventory.
• Operational inventory.
• Safety inventory.

Importance of inventory

Inventory or stock plays a very important role for any business. Good management of this will provide the following benefits: