Inventory Valuation as an Aid to Manufacturing Industry

Inventory Valuation as an Aid to Manufacturing Industry

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Abstract on Inventory Valuation as an Aid to Manufacturing Industry

The purpose of this topic or study inventory valuation as aid to manufacturing industry with reference to Tea Time bread industry Enugu. This is to highlight on the importance that our industries can perform effectively and efficiently as its concerns inventory or stock valuation. To quite this study four research question were formulated a review of literature was done to ensure solid and more elaboration for the study. A structural questionnaire was densely and administered, the research distributes to questionnaire to the employees of tea- Time Bread industry while 35inene natural collected. Based on the above some of the above some of the major finding include presentation of data and them analysis. The analyses were done on two categories the general questionnaires sent and structural personnel inter views. And finally, chapter fine discussed all the finding of the result made by the researcher and recommendation as well as conclusion. However, the research will as a matter of fact add the importance of inventory valuation in an industry of Tea-time Bread.

Chapter one on Inventory Valuation as an Aid to Manufacturing Industry

INTRODUCTION

BACKGROUND TO STUDY

Numerous routine planning and control activities formerly performed by clerks have developed into sophisticated functions with far reaching effects on corporate objectives and profits. Inventory valuation, as a vital element is one of such functions. Inventory otherwise returned to as stock can be defined as items of value held for use or sale by an enterprise and usually comprise of raw material supplied used for production work in progress and finished goods at the end of an accounting period. Valuation on the other hand may be defined as “an element of management and estimation of financial values such like values of property, land, stock etc. Therefore, inventory valuation is simply the means by which merchandise materials goods in process, finished goods supplies.

On hand are values by accounting method of valuation, it is the means by which the store ledger accounts of goods is debited with the value or amount of goods received or acquired and credited with the value of the goods disposal off or sole during the accounting period where as by physical method of valuation, it is the means by which the pans set for buying, storing, handling, issuing, supplies and stock ledger is made more effective by constant physical measures.

It will be more relevant to note that the value of inventory may be substantial, surpassing or only second to that of property plant and equipment depending valuation involves the calculation of items to be held, in stock, decision on the extend of stock, holding of the items individually and collectively, the regulation of the impact of items in the store house and their issues. By the above mentioned processes, it will be possible to adjust continuously the quantity and value held to conform to circumstances at all times.

The manufacturing companies therefore have a lot of factors which comprise the cost of storage as interest on value of store in stock determination of stock obsolescence, recording and accounting etc. it may be very clear that only an efficient application of standard management or management by objective will help to avoid the discrepancies encountered by many companies valuing their inventories. For cost accounting system to be fully of material from the time order is placed with supplies until the material is used to production.

The importance altitude to valuation of inventory is emphasized in paragraph 11 of schedule 2 of the company act of 1968. It states’ if the amount carried forward for stock in trade or WNK work- in progress is material for the appreciation by its members of the companies state of affairs or its profit and loss form the financial year the manner in which the amount has been computed must be stated. However, it is clear that no single method of inventory valuation is suitable to all business firms unless the method adopted is suitable and appropriated to the circumstance of a particular business firm and used consistently institute of chartered accountants contains guidelines on stock valuation and the following are extracts therefrom.

The elements making up cost of stock are direct expenditure on the purchase of goods bought for resale and of material and components used in the manufacturing of goods finished. Other direct expenditure which can be identified specifically as having been to acquire the stock or bring it to its present location examples are direct labour, transportation processing and packaging, such cost if any of the overhead expenditure is properly carried forward in the circumstance of business instead of being charged against the revenue of the period in which it was incurred. Overhead expertise’s may be divided into production administration selling and finance expressed and other charges, which relate to bring the stock to its existing location and condition.

The fragment movement of physical item into and out of inventory is the charges in unit costs complicating the accounting for inventories and cost of goods sold. The questions now is, what costs should be include in computing the naira 9monetary) value of inventories. There does not seen to be a clear cut line of distinction between in enterable necessary for obtaining the inventory and placing it into storage which is reasonably charged into inventory. Thus, the cost arising from inefficiency or prolonged storage of item in inventory and periodic charges. To include these costs in assets, balance could easily result in the cost being greater them any reasonable measure of value. Form a practical point of view, it is not unreasonable for a merchandising firm to place into the inventory account only the net invoice price, freight and the handling costs of placing the merchandise in its storage other cost would be normally considered as expresses of the period.

Inventory records are only a means to an end of inventory Valuation Company has thousands of impressive store card whose balance are always in precise agreement with physical courts taker in its immediate store room. But desperate enrolls paper shuffling efficient employees. Inventory valuation may still be inadequate. Hence the management duty is not clerical accuracy but proper valuation and control. The Tea-time bread industry limited Enugu has its major objectives like other ente4rprise profit maximization. This company was established to employ members of the public both directly and indirectly. By indirect employment the research means the staff of the company whereas by indirect the research means distributor and other dependents on the service of the company.

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