Inventory

Service Companies
For service based companies, inventory is generally a relatively small component, though you may have some consumables that you stock in order to conduct your business.

For the following types of Companies, it is important that you identify where you expect to source your inventory items.

Merchandising Companies

Inventory can be a handful of items to hundreds or even thousands of items.  Of importance is the cost at which you acquire your items and using either a FIFO, LIFO or Moving Cost Averaging for the valuation determination of your inventory.

FIFO or Moving Cost Averaging are the more commonly used conventions, followed by LIFO.

Manufacturing Companies
If you are a manufacturing company, you will have Raw Materials, Work-in-Process (WIP), and Finished Goods.
 
Inventory changes will show on your Cash Flow Statement.  Your total inventory will show on your Balance Sheet.

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