Ledger DrillBeta
Log inJoin for free

Inventory

Also called: Stock

What is inventory?

Inventory is the goods a business holds at a point in time.

At the year end it is counted, and each line is given a value in pounds.

It is valued at the lower of its cost and its net realisable value. Net realisable value is the expected selling price, less any costs still to be paid to make the sale.

Example

A shop holds 10 kettles from a line it has stopped selling. Each cost £20.00 and has a net realisable value of £14.00. The lower figure is £14.00, so the kettles are valued at £140.00.

Why it matters

The value put on closing inventory changes the cost of sales, and so the profit. Inventory is also a current asset in the statement of financial position.

Practise it

  1. Why the value of inventory matters8 min, easyPremium
  2. Cost or net realisable value: which to use9 min, mediumPremium
  3. How to count inventory at the year end7 min, mediumPremium
Module, 4 rooms, PremiumInventory at the year end
See the first roomWhy the value of inventory matters

Ledger Drill is practice, not tax or accounting advice. If this looks wrong, tell us at [email protected].