What is inventory? Easily explained

Most people know at least roughly what an inventory is. However, many cannot explain the term exactly.

Inventory - that is behind the term

An inventory is an inventory.

• As the name suggests, an inventory deals with the inventory of a company or business. This is checked, counted and recorded in writing.
• Such inventory does not necessarily have to be goods or other things such as machines or devices. Finances, which include both assets and debts, are stocks that are recorded during an inventory.
• An inventory is not an estimate but a very precise process. Everything is counted and noted down meticulously. Some things are also weighed or measured. A classic example would be a retail store, such as a discounter or supermarket. Here an inventory is used to record all goods that are on the shelves or in the warehouse.
• An inventory is not a voluntary decision. It is required by law and every company has to do it at least once a year.

Types of inventory depending on company size

Inventory is not the same as inventory. It can be done in different ways.

• Key date inventory: The term already indicates when this inventory is carried out - on a specific key date, usually at the end of the year. The inventory is complete in terms of quantity.
• Relocated inventory: Not every company can make a key date inventory for the annual financial statements. In this case, an inventory before the balance sheet date is possible within the past three months.
• Permanent inventory: A permanent inventory is understood when a company does not record its stocks as a whole on a single day, but instead each item once a year. The point in time at which an article is recorded is arbitrary.
• Sampling inventory: With very large companies or businesses, it is hardly possible to register everything. The portfolio is then recorded according to the value, type and quantity of the assets.

In the next post we explain how the stock exchange works.