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Inventory Control

Inventory is an asset held by a business for sale, encompassing raw materials, work in progress, and finished goods. Effective inventory management aims to ensure a continuous supply, minimize costs, and improve customer service. Techniques like ABC analysis help prioritize inventory items based on their value for better management.

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2 views4 pages

Inventory Control

Inventory is an asset held by a business for sale, encompassing raw materials, work in progress, and finished goods. Effective inventory management aims to ensure a continuous supply, minimize costs, and improve customer service. Techniques like ABC analysis help prioritize inventory items based on their value for better management.

Uploaded by

vanshmhalsekarexe
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

Meaning & Types of Inventory

Inventory is an asset that is owned by a business that has the express purpose of being
sold to a customer. Inventory refers to the stock pile of the product a firm is offering
for sale and the components that make up the product.

In other words, the inventory is used to represent the aggregate of those items of
tangible assets which are – 
 Held for sale in ordinary course of the business.
 In process of production for such sale. 
 To be currently consumed in the production of goods or services to be
available for sale.
The inventory may be classified into three categories: 
Raw material and supplies: It refers to the unfinished items which go in the
production process. 
Work in Progress: It refers to the semi-finished goods which are not 100% complete
but some work has been done on them.
Finished goods: It refers to the goods on which 100% work has been done and which
are ready for sale.
Objectives of Inventory Management
Operating objectives:
a. To ensure continuous supply of materials.
b. To ensure uninterrupted production process.
c. To minimize the risks and losses incurred due to shortage of inventory.
d. To ensure better customer services.
e. Avoiding of stock out danger.
Financial Objectives:
a. To minimize the capital investment in the inventory.
b. To minimize inventory costs.
c. Economy in purchase.
Apart from the above objectives,
Unnecessary investment of funds and reduction in profit.
Increase in holding costs. 
Loss of liquidity. 
Deterioration in inventory.
Techniques of inventory control
ABC Analysis:
ABC analysis may be defined as a technique where inventories are analyzed with
respect to their value so that costly items are given greater attention and care by the
management. Three categories are created namely A, B and C. Following table
represents the approximate classification of items along with their value and quantity

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