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18.07.2022 - 09:16

What is the primary basis of accounting for inventories? What is the major objective in accounting for inventories?

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What is the primary basis of accounting for inventories? What is the major objective in accounting for inventories?

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William April 12, 2023 в 17:02

The primary basis of accounting for inventories is the cost principle, which requires that inventories be recorded and reported at their cost of acquisition or production. This means that the cost of purchasing or manufacturing the inventory, including any direct costs incurred to bring the inventory to its present location and condition, should be included in the inventory valuation.
The major objective in accounting for inventories is to provide accurate and reliable information about the value of a company's inventory, which is a significant asset for many businesses. Proper inventory accounting helps management make informed decisions about production, pricing, and purchasing, and also ensures compliance with accounting standards and tax regulations. Additionally, accurate inventory accounting can help prevent fraud and theft by providing a system of checks and balances.

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