Chapter 2
Exploring Inventory Cost Flows
IN THIS CHAPTER
Seeing how inventory calculations affect financial statements
Comparing service companies and manufacturers
Recognizing a variety of inventory types
Sampling inventory valuation methods
Looking at an inventory worksheet
Some people think that inventory is only the merchandise available for sale in a store, commonly called retail or merchandise inventory. Some businesses, such as service companies, may not carry any inventory. Although they may carry a minimal amount of office supplies, they’re in the business of selling a service (legal advice, consulting) rather than a product.
This chapter covers retail inventory, but it also introduces you to other kinds of product inventory used by manufacturers, including direct materials, work in process, and finished goods. You also find out about two methods a company may use to keep track of merchandise inventory, as well as the four methods businesses may use to value ending inventory: ...
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