• New Wave Accountants

Your Business and Inventory Accounting—A Simple Guide

Every business, big or small, deals with inventories. Whether you have a warehouse filled with items to sell or one storage room of materials you use to carry out your service, looking after your inventory is essential.

Most people think that inventory management only involves counting the items under their care. However, they often forget that inventories are assets that require accounting.

What is inventory accounting, and how do inventory accountants help your business? This article will try to answer these questions and more.

Defining Inventory Accounting

Inventory accounting is the body of accounting that deals with valuing and recording changes in inventoried assets. Assets are estimated to be of future value to the company, so you must take care of them to provide an accurate valuation.

The Generally Accepted Accounting Principles has set specific standards for inventory accounting. They were put in place to prevent companies from inflating and overstating their value.

Inflating a company’s value happens when the cost of inventory value is understated. Since profit is revenue minus cost, an understated inventory can lead to the inflation of the company’s valuation. Meanwhile, if a company overstates their inventory’s value, they overdo their assets and, in turn, overemphasize the company’s value.

Benefits of Inventory Accounting

Inventory accounting is more than knowing what is inside the warehouse or storage room. It offers many benefits beyond how many shirts, shoes, or other products you have in stock.

Here are some of the benefits of inventory accounting:

Representing Financial Health

Getting an accurate representation of your business’s financial health is the main benefit of inventory accounting. This will help in filing tax returns and board update meetings and give you a sense of the current state of your business. It will also assist you in knowing if you can go on as you are or make drastic changes to keep your firm afloat.

Boosting Profit Margin

Aside from knowing your company’s financial condition, keeping a close eye on inventory valuation can help boost profits. When you have a clear picture of your inventory and its value, you can identify other ways to make products profitable—which may not be the final product.

Presenting Opportunities for Growth

After determining your position, you understand where you can and cannot go. In this sense, when you have the full picture of your company’s financial health through inventory accounting, you will understand the areas to improve on and which opportunities you can take to grow your business. You can be more confident in future ventures, knowing that your decisions are well-informed and data-driven.

Hiring an Inventory Accountant

Inventory accounting can be confusing and complicated. That’s why you may need to hire professionals to help you. Accounting firms bring their experience and knowledge to the table. It means you can focus on the company’s direction and leave the accounting nitty-gritty with them.

Here are a few tips to help you find the right accounting firm for you:

  • Check the firm’s credentials

  • Read through client reviews and testimonials

  • Double-check if they can handle inventory accounting

  • Know their rates and how you will pay them

  • Request quotes from different firms and compare them

  • Choose the firm that suits your need and budget


Inventory accounting is more than counting the shirts, shoes, and other pieces of merchandise you have in stock. It also provides you with insights into your business’s financial health and opportunities for growth.

The importance of inventory accounting cannot be overstated. This is why you should seriously consider experienced accountants if you don’t have the knowledge of inventory accounting or the ideal of accounting, in general, overwhelms you.

If you are looking for some of the best accountants in Gold Coast, QLD, turn to New Wave Accounting. We are an award-winning accounting firm that offers top-notch accounting services to push you and your business to greater heights. Team up with us today!

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