Financial Accounting For Dummies

Chapter 13

Learning about Inventory Cost Flow Assumptions

In This Chapter

Seeing how inventory calculations impact the financial statements

Focusing on service companies

Recognizing a variety of inventory types

Learning about the inventory valuation methods

Looking at an inventory worksheet

Some people think that inventory is only the merchandise available for sale in a store. I discuss that kind of inventory (called retail or merchandise inventory) in this chapter, but I also introduce you to other kinds of product inventory used by manufacturers, which includes direct materials, work in process, and finished goods.

You also find out in this chapter 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: specific identification; weighted average; last-in, first-out; and first-in, first-out. Most financial accounting textbooks devote pages to these four methods.

Some businesses actually won’t ...