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during production. Examples include oil Inventory (stock) taking
used to lubricate machines and glue used Inventory-taking, a key component of
to seal boxes in a textile firm. inventory valuation, involves determining
Work in progress: These are items that are the actual quantity of inventory on hand at
midway through the production process. a specific date, typically at the end of an
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They include items that are unfinished or accounting period, and verifying its physical
partly complete by the end of the accounting existence. This process helps in validating
period. Examples of work in progress the quantitative accuracy of the inventory
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include a partly complete building for a records maintained by the business. The
real estate business and an undecorated value of the inventory is established based
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cake in a baking business.
on the quantity indicated by the inventory

Finished goods: These are the output of record. However, discrepancies may
the production process. They are the end sometimes occur between the physical
result of the production process. Even counts and the inventory records. In such
though they are finished, they can form cases, the business must investigate the
part of the input resources in the production cause of the difference and adjust the
of other products. Examples include a books of accounts accordingly. A sample
completed table for a carpentry business of inventory-taking sheet is given as a
and a decorated cake in a baking business. reference in Figure 2.1.

Sheet No. Date:
Performed by: Department:

Inventory No. Item description Purchase price Quantity Location

Signature:
Figure 2.1: Stock taking sheet

Inventory management systems
The term “inventory management systems” refers to organised systems for controlling
inventory levels. Two procedures that are part of these systems are inventory taking, which
involves counting inventory, and inventory valuation. Inventory management systems
can be as simple as manual methods or as complicated as computer systems with related
software for the goal of tracking, managing, and coordinating the movement of things

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