Accounting what is inventory? Processes, methods and note for business

Businesses can control the cash flow, cost – benefit, but if the inventory is “error rate”, the entire spinning reels operate will be deflected. In many businesses, especially manufacturing enterprises – commerce, inventory accounts for a large proportion in total assets, at the same time directly affect the cash flow and business performance. However, many businesses still see the light accounting, inventory, stopping only in the recording number which lack a strategic point of view as well as financial transparency.

The article below Lac Viet Computing will help businesses clearly see the nature, processes, ways of accounting special is the solution digitized effective way to manage inventory accounting in a professional manner, exactly flexibility in all market situations.

1. Accounting what is inventory?

Inventory accounting is the process to track and reflect the quantity and value of goods, raw materials, finished products and tools that businesses are holding in stock at this particular moment. This is an integral part of the system accounting can help businesses know they are nothing corresponding value out why.

Why inventory accounting so important in business?

Inventory usually occupy a large proportion in the total assets of the business, especially with the unit operation in the field of production, trade, logistics. The managers do not closely can lead to:

• Shortages of raw materials, production interruptions;
• Inventory stagnant, wasting, the cost of storage increase;
• Deviations in financial statements, affect the governance decisions.

Therefore, accounting, inventory plays a central role in controlling expenses to ensure effective operation and faithfully reflect the financial situation of enterprises.

Objects should be of interest to accounting inventory

• Accounting department: responsible for the recognition, establishment inventory report periodically.
• Parts inventory management: work closely with accounting to update the status of the actual commodity.
• Leadership: need information, inventory accuracy to a decision to enter orders, production, sales fit.

2. Role of inventory accounting in business

Support control the flow of goods and materials

Through the accounting system, inventory, businesses can track the flow of goods out – to each day. This control helps to limit the maximum loss, confusion, and increase transparency between the relevant departments such as accounting, inventory, purchasing, production.

For example: A manufacturing enterprise to know the amount of raw materials used, remaining, how much from it planning on buying goods on demand – avoid buying excess or deficiency.

• Base to evaluate the effectiveness of production activities, business

Inventory reasonably reflects the ability to coordinate goods and cash flow efficiency. If goods backlog too much, not rotating fast will lead to high capital costs, on the contrary, if the inventory too little can cause loss of business opportunity.

From accounting data warehouse, business easily evaluate the effective use of resources, improved manufacturing processes, optimize inventory turnover ratio – a key indicator in financial analysis.

• Ensure transparency, accuracy in financial reporting

Accounting inventory helps record the exact value of the goods at the time of preparation of financial statements according to accounting standards and regulations (circular 200 or 133). This is extremely important when businesses need to present data to the tax authorities, shareholders or partners.

The errors in the inventory recorded not only affects the profit targets that can lead to legal risk if the tax arrears of the declaration inaccurate.

3. The method of inventory accounting downloads

Management accounting inventory not only is the recorded number of goods but also related to the way that reflects the value of goods out – on correctly aligned. Thus, depending on the operational characteristics, the scale industry, each business can choose one or a combination of the method of inventory accounting below to ensure efficiency and compliance with regulations.

3.1. Method of

Method declaration is often the way recorded continuously transactions related to inventory on the ledger. Every time there is professional import – export warehouse (import of raw materials, production, sales, export user...), accounting have to update now.

Illustrative example: entering 100 beverage cartons in stock, accounting recorded an increase in inventory during the day. When sold out 30-barrel system, recorded export warehouse and reduced the number of values, respectively.

3.2. Methods of inventory periodically

With the method of inventory periodically, business not recorded inventory often. Instead, just make actual inventory at the end of the period (usually the end of the month or quarter). Value of stock is calculated by the formula:

The first viable states + Enter in – The-end = Export warehouse in the states

Suitable with any business?

• Small-scale business, with little variation warehouse.
• No conditions or needs to track inventory in detail by day.

3.3. The method of calculating the price of stock

In accounting, inventory, determining the value of goods of stock directly affects the price of goods sold, profit, financial reporting. There are many ways to calculate the price of stock, the most common include:

• Method weighted average

Value of stock is calculated according to the average price of inventory at each time point. Businesses can, on average, by month, or after each item entry.

For example, Business income of 100 product price 10,000 and then enter the next 100 products price 12.000 copper. The average price is 11.000 copper. When the warehouse, every products is calculated according to this price.

Pros: simple, easy to apply to the goods the most.
Limitations: do Not accurately reflect the price movement if price earnings change much.

• The method first in – first out (FIFO)

Bonded goods before will be output first. Price of stock is the price of the shipment to enter first.

Pros: Reflects the cost of monitoring the actual value of the goods older.
Limitations: In the period of price increases, FIFO makes profits high accounting, tax payable may increase accordingly.

• Method enter the following – prerendered, (LIFO)

Import the following is output first. Price of stock is the price of a shipment, enter the most recent.

Pros: LIFO help reflect the price of the capital close to the current market, often fits in the inflationary phase.
Restrictions: No longer are accepted in a number of accounting systems internationally.

• Rating method, purpose of the

Business determine the specific shipment to be going, and how much.

For example, a company selling mobile phones, have the product code, IMEI number private. When selling a car, the accountant recorded properly by price, enter the original.

Pros: accurate, absolute, consistent with high-value goods, identifying separately.
Limitations: Not suitable for goods in large numbers, homogeneous.

Important note:
The choice of method of inventory accounting should be based on the characteristics, operation, system accounting software are used, as well as requires internal administration. At the same time, enterprises need to ensure compliance with accounting standards in Vietnam (VAS)the general guidance is as circular 200 or circular 133.

4. Accounting process inventory circular 200 and 133

To ensure inventory control effectively comply with current accounting, the business should perform full accounting process inventory according to the instructions in the circular 200 and 133 of the Ministry of Finance. Here are the basic steps in the accounting process inventory:

Step 1. Establishment votes input – output – inventory

Each of the services warehouse import or export warehouse, accountants need to coordinate with warehouse to import receipts or warehouse in the prescribed form. The votes this should be made clear in the following information: name of goods, quantity, unit price, total value, the reasons for import/export, user – recipients – the establishment votes.

For example, When companies buy raw materials, parts purchase, delivery of documents for accounting, then the accounting establishment receipt to record the number of raw materials increase in the inventory account 152.

Step 2. Accounting into account 152, 153, 156 according to each profession

Depending on the nature of goods, accounting of use of the account in accordance:

• TK 152: Raw materials
• TK 153: tools
• TK 156: goods

The accounting must be based on votes income – purpose invoice certificate from the root. In this process, the accountant should determine the correct object recognition and corresponding values to ensure accuracy.

Illustrative examples:

• When purchasing goods worth $ 50 million (excluding VAT), accounting record:
  Debt TK 156: 50.000.000
  Debt TK 1331: 5.000.000
  Have TK 331: 55.000.000
• When goods sold to the customer:
  Debt TK 632 (cost of sales)
  Have TK 156 (value of stock)

Step 3. Update details window – ledger

After the accounts, record transactions, accounting need to update:

• Window details inventory: Keep track of each item, each stock, accurately reflect the number and value according to each moment.
• Ledger accounts, 152, 153, 156: To synthesize the increased volatility – up in the states.

The update details window often helps the business to control inventory effectively, avoid losses, waste and grounded analysis of the price of capital accurately.

Step 4. Collated with actual data periodically (inventory)

The end of each accounting period or upon request, the business must conduct an inventory of the actual inventory at the warehouse. Inventory results will be collated with the data of the books to detect the difference (if any) as the excess, deficiency, loss, damage,...

If the detected difference, the accountant should record the inventory, make accounting adjustments in accordance with the regulations in circular 200 or 133.

For example, If inventory items missing due to natural shrinkage, the accountant can record:
Debt TK 632 (price of capital)
Have TK 156 (goods)

Step 5. Set up inventory report, notes to FINANCIAL statements

The end states general accounting data to set the type of inventory report, including:

• Table synthetic import – export – inventory item code
• Balance sheet: Reflect inventory at targets 140
• Notes to financial statements: presentation of detailed policy, accounting, inventory, pricing methods, inventory, handle the difference...

Inventory report not only serves the purpose of settlement tax, auditing, but also help the leader board decision to enter orders, regulate the production or distribution that fits.

5. These flaws are often met, and how limitations in accounting inventory

Inventory accounting is one of the professional to develop flaws, most if not tightly controlled. Here are the common errors that many businesses often encounter and how to limit:

• Errors in the calculation of the price of stock

One of the common error is to choose the wrong method, calculate the price of stock (such as average price, first-out first – FIFO...). This leads to deviations in the price of capital, directly affect trading results of the business.

Businesses need to specify the method of calculating the price of stock right from the beginning of the financial year to ensure application consistency. When using accounting software should be configured pricing methods to automated software implementation, avoid manipulation craft confusing.

• Noted the lack or excess supplies of goods

The recognition of the wrong quantity of goods import – export or recorded a wrong code between the purchasing department, accounting, warehouse, easy to cause the difference between reality and books.

Should be made to cross-reference between the import – export, purchase invoices and data in software. In addition, should organize training periodically for parts input to minimize errors when updating stock from.

• Not collate the books and actual inventory periodically

Many businesses only inventory at the end of the year or when there are audit does not lead to timely detection of problems, such as loss, top errors, expired...

Businesses should set the calendar inventory periodically (monthly or quarterly), there are processes clear inventory, the inventory attached reconciliations between accounting – the warehouse – management.

6. Application accounting software to manage inventory effectively

The use of accounting software, modern not only helps in recognition business fast but also play an important role in the tightly controlled, optimized inventory – especially for businesses that have multiple items, more inventory, or supply chain complexity.

6.1. Benefits when the application software accounting specialist

• Process automation recorded input – output – exists: the software will update The data immediately after the entry accounting votes help reduce handcrafted limit errors ensure consistency between accounting and stock.
• Calculate the price of stock accuracy by the method of pre-configured: Businesses can choose between FIFO, average, last, or average, and the software will automatically calculate.
• Track inventory in real-time to Help businesses timely grasp the amount of inventory, making a decision to enter or discharge cargo more efficiently.

6.2. Integrated solutions: LV-DX Accounting and LV Financial AI Agent

LV-DX Accounting

• Inventory management, detailed commodity code, location, unit
• Automatic calculation of price of stock, allocation of cost of purchase
• The data link between purchasing department – accounting – inventory – sales, to minimize false information.

Integrated LV Financial AI Agent – progress in management inventory

• Automatic trend analysis, inventory: Based on historical data, the system can identify groups of speeds, rotation, slow or exceeded inventory safe.
• Early warning risk inventory or shortage of urgent Help businesses be more proactive in planning to purchase or promote sales.
• Support plan forecast import – export – inventory: Instead of relying on subjective experience, LV Financial AI Agent using real data to predict demand for decision support.
• Integrated reporting, multidimensional analysis, service management, inventory management by industry, region, the distribution chain or group product strategy.

Inventory accounting is not only professional technical but also as a tool to support financial management effective in business. When done right standard of transparency and application of technology fit, the business will be more active in cash flow, avoid losses and ensure stable supply for production activities – business. Don't let the flaws in the accounting inventory become “blind spots” in financial – be proactive capacity accounting and experience the solution digitized as LV-DX Accounting or LV Financial AI Agent to manage inventory effectively transparent optimal more each day.