Financial Accounting

12 CHAPTER

Valuation of Inventory

MEANING OF INVENTORIES

Inventories are assets:

1. Held for sale in the ordinary course of business, or
2. In the process of production for such sale, or
3. In the form of materials or supplies to be consumed in the production process or in the rendering of services.

Inventories encompass goods purchased and held for resale, for example, merchandise purchased by retailer and held for resale, computer software held for resale, or land and other property held for resale. Inventories also encompass finished goods produced, or work in progress being produced, by the enterprise and include materials, maintenance suppliers, consumables and loose tools awaiting use in the production process. Inventories do not include machinery ...