Inventory Meaning And Explanation With Examples
Inventory or Stock or Merc ha ndise means those goods or material used in the production of goods being held for resale purposes or remained unsold at the end of Accounting Cycle . Inventory is a Current Asset . For Example, Mr. A, as a retailer started his business with Cash Rs. 200000. Then, he Purchased 10 Chairs for Total amount of Rs. 100000 at the rate of Rs. 10000 each for resale purposes. He decided to sell Chairs at the of Rs. 15000 each. Only 5 Chairs are sold. So, at he end of Accounting Period, 5 Chairs remains unsold. In this case, 5 Chairs which remain unsold is Closing Inventory or Closing Stock for the business. Inventory Journal Entry When goods purchased for resale purposes, then inventory takes into place. Eventhough it is called purchases but it is added to the Beginning Inventory of Previous Accounting Cycle. For Example, Mr. A Purchased Goods worth Rs. 50000 For Cash , then following Accounting Journal Entry is recorded...