Definition of inventory
The current assets in the narrower sense are considered to be stocks. The classification scheme according to Section 266 (2) HGB divides the inventories from the point of view of industrial companies in the following way:
Types of inventory
- Raw materials and supplies;
- work in progress, work in progress;
- finished goods and merchandise;
- advance payments made;
This breakdown of inventories is common to other companies, e.g. B. commercial establishments, not very useful. In addition, the allocation of inventories to the groups mentioned can cause difficulties, especially in the case of multi-level processing companies that sell their products at different stages of manufacture.
Raw materials go directly into the finished product and form its main component. Auxiliary materials are also used directly for the product, but only fulfill an auxiliary function. Operating materials are not part of the finished product.
work in progress
Unfinished goods include all those inventories that are not yet ready for sale but that have already incurred expenses as a result of their processing in the own company. Services up to Balance sheet date are not yet completed are shown as work in progress.
Finished products are only those stocks that are ready for dispatch and that have been treated or processed in-house. Goods are commercial items of foreign origin that are resold without significant further processing. The advance payments made relate exclusively to inventories that have not yet been delivered up to the point in time when the risk is transferred.