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Essentials of Inventory Management, 2nd Edition by Max MULLER

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CHAPTER 2INVENTORY AS MONEY

Why should you care about the financial aspects of inventory? Because inventory is money.

Even if you do not have a financial background, it is important to understand and appreciate that inventory information in financial statements can be useful in the operation of your business. A basic understanding of how inventory appears on the balance sheet and its impact on the income statement and cash flow statement will improve your ability to have the right item in the right quantity in the right place at the right time.

Accounting for Inventories

The three basic types of inventory are:

1. Raw Materials—raw materials inventory is made up of goods that will be used in the production of finished products (e.g., nuts, bolts, ...

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