Introduction

For our consumers, they may address the things that they buy
with many terms like goods, products, stuff etc., but for us, accountants, it
is called INVENTORY. What is inventory? As defined in PAS 2 paragraph
6, inventories are assets held for sale in the ordinary course of business,
in the process of production for such sale or in the form of materials or
supplies to be consumed in the production process or in the rendering of
services.
There are lots of transactions which involve inventories; one of
which is inventory control. There are two systems on how you can control
your inventory. The first one is Periodic Inventory system and the other is
Perpetual Inventory System. Periodic Inventory System is recommended
for low value inventory items such as inventory of grocery stores while
Perpetual Inventory System is used for low-volume, high cost items, such
as automobiles and jewelry. Another transaction is purchasing of
inventory, you can either purchase inventory in cash or on credit. When
you purchase inventory on credit, the supplier might give you discount if
you pay the said inventory within the discount period. You might want to
analyze on which alternative you will choose, cash or credit. Once you
have purchased your goods, you can sell them with a profit. The profit can
be a percentage of your cost of sale or your sales. Either way, you have to
account for your cost of sales. The cost of sales will then be deducted
from the inventory. There are many formulas to choose from in computing
your cost of sales. You can choose from Specific Identification of cost, First
In First Out, Weighted Average and Moving Average. And lastly, inventory
valuation. Inventories are always measured at LCNRV or Lower of Cost and
Net Realizable Value. Net realizable value is the selling price less cost to

complete and cost to sell. Inventories are usually written down on item by
item basis.
In every situation, problems cannot be avoided. Same with
accounting for inventory, there are problems that may arise. For example,
erroneous addition to or deduction from inventory. Sometimes the stocks
are not up to date because it's a tedious work for many. So what exactly
can our flowchart offer? It offers internal control and monitoring of the
inventories that the company purchase and sell since, in our experience,
this is the most common problem in inventories-it is difficult to monitor all
the inventories that get in and get out of the entity manually. Why stress
yourself when you can relax while monitoring your inventories correctly?