Inventory accounting is a branch of accounting that is needed to evaluate a company’s inventory assets. It looks after the value and accounting for changes under inventoried assets. The inventory of a company is basically divided into three stages of production – raw materials, work-in-progress, and finished goods which are ready to be sold in the market. The role of the inventory accounting in these three processes is to assign the values to each of them and termed them as the assets of the company. Assets are the goods which will be having high value in the future for the company. Thus, it needs to be properly valued so that a precise value can be determined by the company.

The inventory items included in the production stages can change its value that will impact the company and its working. The reasons can be any for the change in value, such as the taste of the customers, deterioration, depreciation, increase in the demand, becomes outdated, reduction in the market supply, and many others. A perfect inventory accounting system will keep a close watch on the changes made to the inventory goods at all the three levels of the production process and modify the company asset values along with the price linked with the inventory consequently.Continue reading