Definition of Inventory and Bookkeeping Methods

Inventory is a stock of goods that are the main business objects of the company. Included in the inventory of these goods is the inventory of raw materials, along with supporting materials, the inventory of goods that must be recorded in the books, both concerning expenses (sales) and the income (purchases) of goods. By looking at the bookkeeping, the company can find out the value of the inventory in the warehouse. Thus, there is a bookkeeping/recording of goods inventory that avoids spending on goods inventories. There are two methods that can be used in the unit to record the inventory of goods, namely the perpetual method (continuous inventory) and the physical inventory (physical method).

Various Ways of Inventory Assessment

There are several ways or methods that can be used for inventory assessment: the first in first out method, the last in first out method, the weighted average method, the at method. Retail and moving average method.

The perpetual inventory system is used if there are not many types of goods being sold; in the opposite case, a periodic inventory system is used.

Inventory is generally carried out at the close of the financial year by stopping the company's operations. However, an inventory without stopping the company's activities can also be carried out.

The inventory assessment for a company is different from the inventory assessment for a trading company, especially with regard to the equivalent unit calculation. Equivalent units are the number of units that should be able to be produced both at the beginning and at the end of the accounting period. The equivalent unit calculation applies to goods that have not been finished yet become finished goods that are ready to be sold. These items are called semi-finished goods. Inventory assessment at industrial companies involves calculating the cost of used semi-finished goods.

The Number Of Equivalent Units Consists Of:

1. The number of units that were completed at the beginning of the period

2. The number of units completed at the end of the period

3. The number of units generated during the accounting period and already in the form of finished goods.

Inventory assessment can be carried out by means of a specific identification method, average cost, FIFO, and life. Then proceed by choosing between the assessment based on "cost" or "the lowest price between cost and market".

Plant and Equipment

Plant and equipment are tangible fixed assets that are permanent. It is called relatively permanent because it is used for a long period of time, namely more than one accounting period. Tangible fixed assets are a form that is owned by a company and appears on the company's balance sheet. Therefore, everything related to changes in the value of these assets must be recorded. For example, the reduced value of production machines because they have been used, must be calculated as depreciation expense. Likewise, all costs incurred in obtaining fixed assets, until they are ready for use in company activities, must be considered as acquired assets.

Depreciation

Depreciation/depreciation is the replacement of the lost performance value of the plant and equipment which results in a reduction in the value of these assets. The term depreciation is used to describe the cost of tangible assets, such as machines for the production process and buildings. In other words, depreciation is charged on assets that are tangible, durable, used in company operations, and are not for sale.

Revaluation (Revaluation)

In terms of accounting, the goal that must be achieved in conducting a revaluation (revaluation) of the plant and equipment owned by the company is so that the periodic profit and loss that has been determined through the process of bringing together the income earned with the costs incurred can describe it properly. About the company's business results.

These assets need to be depreciated so that when the assets are declared no longer economically profitable, the company can buy new assets.

What every company needs to pay attention to is the economic age of an asset, for example, machines for the production process. Although this machine is said to be durable, it still has a certain economics tuition life. When the machine costs more than / is not balanced with its production, that is when the machine must be replaced with a new machine.

Depreciation methods can be arranged according to company policy by taking into account the regulations issued by the government. The method to be used should be one that can provide benefits for the company concerned. The accelerated depreciation method will provide benefits with larger working capital in the first years than if the straight-line method or units of production method is used.

Reassessment carried out on plant and equipment which could result in an increase in the value (appraisal) of the plant and equipment concerned, then the increase in value is recorded as capital revaluation.

As for the revaluation that is carried out on the plant and equipment which results in a devaluation of the plant and equipment concerned, the value of the decline in accounting accounts for the plant and equipment will be reduced.

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