Inventory Accounting

DEFINITION of 'Inventory Accounting'

The body of accounting that deals with valuing and accounting for changes in inventoried assets. Changes in value can occur for a number of reasons including depreciation, deterioration, obsolescence, change in customer taste, increased demand, decreased market supply and so on.

BREAKING DOWN 'Inventory Accounting'

It is a requirement of GAAP that inventory be properly accounted for according to a very particular set of standards, so as to limit the potential of overstating profit by understating inventory value, and to limit the potential to overstate a company's value by overstating the value of inventory which has in fact materially depreciated in value.

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RELATED FAQS
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    As with most matters related to generally accepted accounting principles (GAAP), accountants assigned with the task of applying ... Read Answer >>
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    Learn how to analyze inventory using financial statements and footnotes by doing ratio analysis and performing qualitative ... Read Answer >>
  3. Why should investors care about the Days Sales of Inventory (DSI)?

    Learn about days sales of inventory and what it measures; understand why an investor would want to know a company's days ... Read Answer >>
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    Learn about the inventory turnover ratio, how it is calculated and what this efficiency metric tells businesses about their ... Read Answer >>
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    Learn about inventory that is part of current assets and working capital, which is the difference between current assets ... Read Answer >>
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