x Enterprises, production and business establishments that have just come into operation are still vague about the concept of what is Inventory?
x You wonder and can't figure out what the main items in inventory include?
x Does your business not know how to manage inventory safely and effectively?
Inventory is a concept that is often fundamentally misunderstood in life. In fact, this is a popular concept of economics with many points to note. Next, at Proship.vn will use this article to clarify the concept of inventory, what inventory includes, what are the methods of declaring inventory,... for businesses and private individuals to clearly understand. .
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What is inventory?
What is inventory? Inventories are products, raw materials, and tools that a business keeps in stock for production or awaiting sale. Currently, many people still misunderstand the meaning of inventory, thinking that inventory is products that are damaged, have manufacturing errors and cannot be sold on the normal market but are only waiting to be liquidated at cheap prices. However, for business managers, inventory is products kept in warehouses and factories for production or final sale.
Specifically, according to Vietnamese Accounting Standard No. 02 issued together with Decision No. 149/2001/QD-BTC, inventories are assets:
- In the process of production or unfinished business;
- Held for sale during normal production and business periods;
- Raw materials, materials, tools, instruments for use in the production, business/service provision process.
What types of inventory are there?
What does inventory include? Inventory includes:
- Goods purchased for sale: including goods in inventory, goods purchased on the way, goods sent for sale, goods sent for processing;
- Unfinished products: Unfinished products and finished products that have not yet completed warehousing procedures;
- Finished products in inventory and finished products sent for sale;
- Uncompleted service costs;
- Raw materials, materials, tools, instruments in inventory, sent for processing and purchased are on the way.
* Example - For a sugar manufacturing enterprise, this enterprise's inventory is:
- Raw materials to make sugar: Sugarcane;
- Tools (costing less than 30 million) involved in the sugar production process;
- Finished product (a sugar product made from sugarcane): Refined sugar;
- Finished products in progress (ie unfinished products, also known as unfinished production and business costs): molasses, sugar water,...
What is the purpose of inventory management?
According to the research report, the main purpose of inventory management is "Provision - Speculation - Transaction" , specifically:
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Preventive
It is restocking inventory to prepare for the worst possible business situations. Similarly, at some times there are also unpredictable decreases in the supply of raw materials.
If a business encounters both of the above situations, inventory provisioning is the answer to the difficult problem that business is facing.
Speculative
Holding inventory helps businesses gain advantages when prices change.
Transaction
Maintaining inventory is also a way to help businesses avoid bottlenecks in the production and sales process. This will help businesses ensure production is not interrupted due to lack of raw materials. On the other hand, sales are also not affected due to the availability of finished goods.
How many methods are there to declare inventory?
As above, Proship Logistics has clarified the concept of what inventory is, what inventory is in English, what inventory includes, etc. Next are the commonly applied inventory declaration methods. in business.
According to Circular 200/2014/TT-BTC, Circular 133/2016/TT-BTC there are 02 methods of declaring inventory as follows:
Periodic inventory method
It is a method of reflecting inventory at the beginning and end of the period. It is not regular and continuous, so it only calculates the value of inventory at the end of the period. Formula shown:
Inventory value at the beginning of the period + Value imported during the period – Inventory value at the end of the period = Export value at the end of the period
Regular declaration method
It is a regular and continuous monitoring method that promptly reflects the import and export situation of inventory and can calculate the export value at any time. The formula for calculating the value of ending inventory is shown:
Value of inventory at the end of the period = Value of inventory at the beginning of the period + Value of goods received during the period - Value of goods delivered during the period
Tips for effective inventory management
If you are interested, please immediately refer to the following most effective ways to manage inventory:
Use barcodes for easy inventory management
Barcodes are a tool to help classify and arrange inventory scientifically and effectively and are being used by most businesses in the process of managing import/export of warehouse goods. Barcodes are used to name each group of goods so that they are easy to name and manage.
When you need to search for an item, the accountant just needs to scan the code, the system will tell you the shelf location, quantity, condition of each item and the information fields that have been set up from first for ease of reference.
Use effective inventory management software
Due to the important nature of warehouse management activities, many units and businesses have chosen software as a solution to support warehouse management accounting accurately and effectively.
Accordingly, it is possible to use additional warehouse management software, with many effective features such as controlling the value, quantity, and inventory of goods, monitoring the circulation and use of raw materials and supplies, and preparing and control warehouse receipts and other reports when necessary.
Continuously inventory goods in the warehouse
Inventory is closely linked to the production and business process of an enterprise, so it often fluctuates continuously. For effective inventory management, it is necessary to take inventory regularly, update the status and record any abnormalities for timely handling.
When taking inventory, you need to pay attention to the data on the number of goods in the current warehouse, how many items are damaged, expired, how many items are lost, etc. Then, compare them with the above data. books to check for discrepancies, if any. Actual data is the basis for managers to consider and make necessary adjustments to avoid causing heavy losses later.
So, you know what inventory is , what inventory includes, what inventory is in English, how to manage inventory effectively, how to declare inventory,... to serve your needs. Effective service for business, production and storage of goods in each enterprise.
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