Meaning of InventoriesInventories are unconsumed or unsold goods manufactured / purchased. According to Accounting Standard 2 (Revised), inventories are assets -
- Held for sale in the ordinary course of business or
- In the process of production for such sale or
- In the form of materials or supplies to be consumed in the production process or in the rendering of services.
Thus, the term inventory includes stock of finished goods, work in progress, raw materials and components. In case of a trading concern, inventory primarily consists of finished goods. In case of a manufacturing concern, inventory consists of raw materials, components, stores, work in progress and finished goods.