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Accounting for inventory

Inventory in the financial statements

1.1 Inventory in the statement of profit or loss

When calculating gross profit we match the revenue generated from the sales of
goods in the year with the costs of purchasing or manufacturing those goods.

You should understand that the costs of the unused inventory should not be included
in this figure.

These costs are carried forward into the next accounting period where they will be
matched against revenue generated on goods that are sold in that period.

1.2 Inventory in the statement of financial position

The goods carried forward into the next accounting period are classified as assets on
the statement of financial position.

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