Page 225 - F1 - AB Integrated Workbook STUDENT 2018-19

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
Link to purchasing system raw
materials

Raw
Must be valued at year end
materials

Must be valued at year end Work in
progress

Finished
Must be valued at year end
goods

Inventory
Link to sales system
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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