Inventory values are required for the Balance Sheet and Cost of Sales and is essential to understanding profitability.
Balance Sheet Inventory is listed in the Current Assets section of the Balance Sheet. Cost of Sales The inventory value is the basis for the Cost of Sales on the Income Statement. Current Assets Raw Materials 1,000,000.00 Work in Process 500,000.00 Finished Goods 300,000.00 Gross Inventory 1,800,000.00
-150,000.00 Net Inventory 1,650,000.000 Income Statement Sales 1,000,000.00 Cost of Sales -450,000.00 Gross Income 550,000.00
Manufacturing Activity Debit Credit Receipt of Item Inventory Cash (or Accounts Payable) Sale of Item Cost of Sales Inventory Activity Debit Credit Receipt of Raw Materials Raw Materials Goods Received, Not Invoiced Issuing Raw Material to a Job
Work in Process (WIP)
Raw Materials On Payment Goods Received, Not Invoiced Cash (or Accounts Payable) Upon Job Completion