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Here are two steps to disclose your inventory and cost of sales in your annual financial statement

by , 31 July 2014
Your inventory is part of your company's net wealth and expenses. So you must include every piece of stock and raw material in your company's finances.

You then need to include these values in your annual financial statement. But how do you work out and disclose your inventory and cost of sales for this statement correctly?

If you get this wrong it could throw off all of your finance records for that year.

The good news is we have two easy steps that'll help you disclose your inventory and sales costs accurately every time...

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Step #1: Include the inventory in your financial statement 

 
First you must accurately calculate your inventory costs using one of these four calculation methods
 
Then you must include the total amount of your inventory at the end of your statement of financial position. 
 
Also include a breakdown of what the balance consists of in the notes for your annual financial statement.
 
For example:
 
Total Inventory cost: R13 000
 
Notes for the financial statement:
 
Raw materials: R4 500
Work in progress: R2 000
Finished goods: R5 000
Consumable stores: R1 500
 

Step #2: Include the cost of inventory sold in your statement of comprehensive income

 
You must disclose the amount of your inventory you've sold in your statement of comprehensive income.
 
Remember to calculate your inventory using your manufactured inventory costs and inventory purchased for resale costs.
 
These two statements then form part of your annual financial statement. This will help you get a clear idea of your company's position regarding sales and inventory. 
 
Just ensure you do your inventory valuation correctly and only add the important expenses and none that change from month to month.
 
 
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