This document discusses inventories and their classification. It defines inventories as assets held for sale, in production, or as materials used in production or services. The document notes that firms try to minimize costs by reducing inventory levels while maintaining enough to meet demand. It also states that a hospital controls important medical supplies like blood. The document classifies inventories into four classes: raw materials, work-in-process, finished goods, and supplies. Raw materials are basic inputs, work-in-process are partially finished goods, and finished goods are complete but unsold manufactured items. Supplies are regularly used materials that do not become part of finished goods.

1. Inventory
management

2. INVENTORIES
“Assets which are held for sale
in the ordinary course of
business, in the process of
production for such sale, or in
the form of materials or supplies
to be consumed in the production
process or in the rendering of
services”
- Philippine Accounting Standards (PAS) No. 2

3. INVENTORIES
Firms try to minimize
cost by reducing
inventory levels.

4. INVENTORIES
Cost minimization is the
major factor in obtaining
this delicate balance.

5. An inventory level
for finished goods
is a direct function
of demand.
INVENTORIES

6. INVENTORIES
A hospital has
methods to
control blood
supplies and
other important
medical items.

7. INVENTORIES
- The common
thread that ties all
the functions and
the departments of
an organization
together.

8. Classes of
Inventories

9. Classes of
Inventories
Classified as current assets in the
balance sheet.
1. Raw materials inventory
- It consists of basic
materials purchased from
other firms to be used in
the production of goods or
products.

10. Classes of
Inventories
Classified as current assets in the
balance sheet.
2. Work-in-process inventory
- It consists of partially finished
goods requiring additional
work before they become
wholly completed.

11. Classes of
Inventories
Classified as current assets in the
balance sheet.
3. Finished goods inventory
- This inventory consists of
completely manufactured
goods that are not yet sold.

12. 4. Supplies
- These are materials
regularly used by the
company but do not
form part of the
finished goods sold.
Classes of
Inventories
Classified as current assets in the
balance sheet.