CJ CPAs Simplified: Basics of Inventory Management ???? Inventory is one of the most critical assets for businesses, and how it’s managed can impact financial health. Proper inventory accounting ensures accurate financial statements and strategic decision-making. ?? Key Inventory Accounting Methods: ?? FIFO (First-In, First-Out)– Assumes older inventory is sold first—ideal for rising costs as it shows higher profits. ?? LIFO (Last-In, First-Out)– Assumes newer inventory is sold first—lowers taxable income during inflation but can undervalue stock. ?? Weighted Average Cost – Spreads costs evenly, reducing fluctuations in financials. ?? Specific Identification – Tracks the cost of each individual item—useful for high-value goods like cars or jewelry. ?? Why It Matters: - Affects cost of goods sold (COGS) and net income on financial statements. - Helps manage tax liabilities and optimize profit margins. - Influences cash flow and inventory turnover, impacting overall business strategy. At CJ CPAs, we help businesses choose the right inventory method to align with their financial goals. ?? How does your business track inventory? Let’s discuss in the comments! ?? #CJCPAsSimplified #InventoryManagement #AccountingBasics #BusinessFinance #CJCPAs
