PERSPECTIVE AND ISSUES
Accounting for inventories is not usually as critical an area for not-for-profit organizations as it is for commercial enterprises. Not-for-profit organizations might have inventories that consist of donated supplies, materials, publications, and other items used in the organization's activities or programs or held for resale to the public. They may also have inventories that they use to produce products for sale, similar to a commercial enterprise. Many not-for-profit organizations use “commercial-like” activities to supplement their fundraising or other revenue streams. For example, a museum is likely to operate a gift shop. A university is likely to operate a bookstore. Other not-for-profit organizations employ people with disabilities to actually manufacture goods for sale. Similar to a commercial enterprise, inventory should be recorded at cost, which should include all direct and indirect costs incurred to prepare it for sale or use.
Not-for-profit organizations may acquire merchandise inventory for resale. Examples include items held for sale by a bookstore, dining service, kitchen, ...