Answer to Question #219899 in Accounting for Alexis peters

Question

What constitutes inventory? Discuss the benefits of inventory management.

Answer 1

Solution:

Inventory consists of all the items, whether goods, merchandise, and materials that are held by a business for trading or selling in the market to earn profit. These can include finished goods, raw materials, and Work in progress.

Inventory management refers to the process of controlling inventory being utilized by the company from beginning to end, that is from purchase to selling. It involves ordering, storing, selling, tracking, and monitoring all the inventory being used by the business.

The benefits of inventory management are as follows:

·        Greater cost savings and eliminating wastes.

·        Reducing the risk of overselling.

·        Leads to the prevention of stock-outs and excess stocks.

·        Provides better product visibility.

·        Enhances the ability to make appropriate and profitable business decisions.

·        It leads to more productivity.

·        It enhances a better-organized warehouse.

·        It creates a better customer experience.