Inventories are important to manufacturers in general, and varies widely between different industry groups. The composition of this part of the asset is a great variety of articles, and that is why they have been classified according to their use in the following types:
- Inventories of Raw Material Inventories of Production in Process Inventories of Finished Products Inventories of Materials and Supplies
Inventories of raw materials
In every industrial activity, a variety of articles (Raw Materials) and materials are present, which will be subjected to a process to obtain a finished or finished article at the end. The materials that intervene to a greater extent in production are considered «Raw Materials», since their use is made in sufficiently large quantities of the finished product. The Raw Material is that or those articles subjected to a manufacturing process that will ultimately become a finished product.
Inventories of Products in Process:
The inventory of products in process consists of all the articles or elements that are used in the current production process. That is, they are partially finished products that are in an intermediate degree of production and to which the direct labor and indirect costs inherent in the production process at a given time were applied.
One of the characteristics of the Production in Process Inventory is that the value increases as it is transformed from raw material into the finished product as a consequence of the production process.
Finished Products Inventory:
These include the articles transferred by the production department to the finished products warehouse, as these have reached their total completion level and that, at the time of the physical inventory taking, are still in the warehouses, that is, those that have not yet They have been sold. The level of inventory of finished products will depend directly on sales, that is, its level
Materials and Supplies Inventory:
The inventory of materials and supplies includes:
Secondary raw materials, their specifications vary according to the type of industry, an example for the brewing industry is salts for water treatment.
Consumer items intended to be used in the operation of the industry, within these consumer items the most important are those intended for operations, and are made up of fuels and lubricants, these in the industry have great significance.
Articles and materials for repair and maintenance of machinery and operating devices, repair items due to their large volume need to be adequately controlled, their existence varies in relation to their needs.
Inventories
The subject of Inventories, in particular and as part of such a vital line in the assets of the company, has greater emphasis in some aspects such as: The Conception of what an inventory is, the role it plays in the company, its Real importance, the different types of inventory that exist or can be applied, the utility derived from applying them correctly and with the rigor required by each particular case.
General considerations
From time immemorial, Egyptians and other ancient peoples used to store large quantities of food to be used in times of drought or calamities. This is how the problem of inventories arises or arises, as a way of dealing with periods of scarcity. That ensure the subsistence of life and the development of their normal activities. This form of storage of all the goods and food necessary to survive motivated the existence of inventories.
Inventory Concept:
According to Finney-Miller, in his book «Intermediate Accounting Course», Volume II, Page 225, the inventories of a company are defined as the purchase of articles in conditions for sale. Merchandise Inventories are found in businesses that have wholesale and retail sales. These businesses do not alter the form of the items they purchase to sell.
Another concept was extracted from bulletin No. 1, Accounting Principles and Standards on the audit of Inventories by Prof. Maldonado; And it goes like this: The Word inventory is used to name the set of those items of tangible personal property.
The term inventory includes the goods awaiting sale (the merchandise of a commercial company, and the finished products of a manufacturer), the articles in the process of production and the articles that will be consumed directly or indirectly in production. This definition of inventories excludes long-term assets subject to depreciation, or items that when used will be classified as such.
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