Inventory Accounting

Inventory accounting deals with the value of inventory i.e. stock of finished products for sale and any semi-manufactured or raw materials to be used in the production of finished products. Inventory is generally valued at cost or net realisable value (market-based valuation), whichever is lower. Inventory held is presented on the balance sheet as part of current assets and are a key element of Cost of Goods Sold and therefore impact the income statement. The inventory cost is affected by the cost method used, for example, FIFO (first in/first out), LIFO, (last in, first out) and the weighted average are the different inventory cost methods.