![]() On the other hand, the truck dealer has bought the vehicles for selling them to the customers. Considering the vegetable business example discussed above, the truck was not for selling to any customer, rather it was bought to ship vegetables and could only be sold if the vegetable wholesaler decides to buy a new one or it has broken down. Lastly, the main purpose of having products is to sell them to that company’s customers. These are the investments or assets of that business. If any of the products/services of the company are never made available for sale then those things are not inventory. Secondly, all the product/services of the company’s assets should be available for selling things or should soon be available for sale. So what is inventory depends on a case-to-case basis? On the other hand, for a truck dealer, the truck is the inventory since they are selling it. This truck is the asset here whereas the vegetables and fruits are the inventory. For example, a person who owns a vegetable shop (a wholesaler) needs to deliver the vegetables and fruits in his truck. Inventory – explainerĪssets are considered to be a part of the primary business of the company. Inventory that stays with the company after a period of one year is treated as obsolete inventory or deadstock and is often considered a liability. Some other examples of current assets are expenses, accounts receivable and also insurance plans. When considered in accounting, inventory is treated as a ‘current asset’ which a company or a business keeps for less than a year. ![]() It may remain the same for years and might not be replaced often. Assets, on the other hand, are furniture, equipment, fixtures or any such things which remain constant over time. It may change every day, month, quarter or year. Inventory is parts, materials and products and their quantity changes from time to time. On the other hand, an asset is for purchasing and managing inventory for aiding the company, so it has a different value. The main difference between an inventory and an asset is that any company or a business that sells its stock for making money or generating profit is an inventory. What is the basic difference between inventory and asset? For example, a parlor, in a single day can offer its services to 20 customers which is its inventory. For knowing whether an asset is inventory or not we need to check the characteristics of inventory.įor any service providing company the service offered by them at a specific time is its inventory. The pure purpose of the inventory is for generating profit but if an asset is for sale it cannot be considered as inventory. ![]() These are neither used in producing anything nor for the promotion of business. In simple words, the materials and goods act as items to be sold by a business for profit to the customers. Inventory is also known as the merchandise, in a business, which refers to the materials and goods which a business has for sale to its customers for the future.
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