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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...

Here we discuss Inventory Definition and What is Inventory in Accounting. Inventory includes those goods which are held by the business for resale purposes. The inventory is convertible into cash very quickly and it is done within the operating cycle of the business. In British Accounting System, we called Inventory as Stock. Last Accounting Period Balance of Inventory is Opening Inventory of the current accounting period and current’s year ending Inventory is the beginning of the next accounting period and so on. Inventory is always measured on Cost or NRV whichever is less. Here NRV is Net Realizable Value that includes all costs incurred in bringing the goods in saleable position. It is calculates as: NRV = Sales - All Costs Incurred in bringing the goods in saleable position Closing Inventory is shown in the Income Statement and Balance Sheet while Opening Inventory is shown only in Income Statement.