The term Inventory refers to all the materials held by an organisation that are necessary to fulfil the needs of the customer.
There are various forms of inventory such as Raw Materials (RM) and Work in Progress (WiP). Each type of inventory represents money spent by the organisation until the inventory is ready to be sold to the customer.
It is important not to confuse inventory with other items owned by the company, these are known as Fixed Assets.
Fixed assets are items that the business owns and that cannot be easily moved. They are important aspects of a business and all have a monetary value and appear in financial documents as credits.
Some assets are Tangible (i.e. a physical object that can be touched), for example:
- Land;
- Buildings;
- Machines;
- Equipment; and
- Vehicles.
