Keeping track of inventory is a crucial yet challenging process—and the more raw materials, components, and products a company has, the more challenging it gets. This program explores key aspects of managing inventory while keeping an eye on how inventory figures impact a company’s bottom line.
First, the physical counting process is illustrated, including special situations such as figuring out who owns merchandise in transit or on consignment. Second, average cost, FIFO, and LIFO costing methods are analyzed. Third, periodic and perpetual systems of valuation are contrasted with three methods used in special situations: the lower-of-cost-or-market method, net realizable value, and estimating. Fourth and finally, the impact of inventory errors on financial statements is addressed.