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Financial systems and procedures

The inventory system

6.1 Stages in the inventory system

The main stages in the inventory cycle and the issues to be considered are as
follows:

Purchase of
raw
materials

Raw

materials

Work in
progress

Finished
goods

Inventory
sold

The production manager will decide on the required inventory purchases bearing in
mind the items to be produced and the inventory balance on hand.

In some (automated) systems, raw materials will be ordered automatically when the
balance falls to a certain level.

At the end of the year, all inventory will be counted and valued so that the statement
of financial position can be produced.

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