What is the difference between inventory and stock

Here we discuss the top difference between inventory and stock along with infographics and comparison table. You may also have a look at the following articles —. Free Accounting Course. Login details for this Free course will be emailed to you.

Forgot Password? Article by Melvin Sewak. Difference Between Inventory and Stock There are many buzz words in finance that have been used interchangeably in many contexts. Comments Thank u very much for helping us by giving info about inv nd stock. Please select the batch. Cookies help us provide, protect and improve our products and services. By using our website, you agree to our use of cookies Privacy Policy. Inventory refers to the value of a sum of finished products, work-in-progress products, and raw materials.

Stock refers to the products sold that could be in any form to the customer. It is used in a business context as it directly affects the top line of the company. As a result, leftover inventory at books is valued at the most recent price paid for the most recent stock of inventory.

As a result, the inventory asset on the balance sheet is recorded at the most recent cost. Inventory carrying capacity and inventory turnaround are majorly tracked majors for tracking the optimum level of inventory required for the business. An analyst looks into details of inventory turnover and compares them with a similar industry to understand the efficiency of handling inventory.

Raw Material — Raw material is building a block to make a final product. Tata Motors buy steel bars, sheet metal, and tubing to manufacture vehicle frames and other vehicle parts. When Tata Motor puts all materials into production and starts shaping the metal and cutting the bars, the raw material becomes work in process inventories. Work in Progress — Work in progress includes all partially finished products that the company produces.

As a car maker, all their inventory down the assembly line is considered as work in progress inventory until it is finished. Finished Goods — Finished goods are the products ready to sell to retailers or even the end users or wholesalers. Management can choose whichever method suits their business. But each chosen method has its own implications on the income statement in different scenario especially when prices of raw material are fluctuating, Frequent change in accounting method is considered as manipulation of accounting books.

A stock is valued at cost of acquisition or market price whichever is less. As stock gets sold it is removed from the balance sheet and recognized as revenue into the profit and loss statement. Whenever a stock is piling up on the balance sheet it means finished products are not selling into the market then it becomes a really worrisome condition for the management.

Either they should cut down the production or push the product into the market because carrying stock on a book is always painful for the company financially. Companies like Eicher motors having good demand for their product or waiting period generally have zero stock. Zero stock is the best case for the company as it shows demand is high for its products. More the stock sold more is the revenue. Stock levels are rising on the balance sheet is considered as the red signal from the analyst.

Stock is nothing but part of the inventory. This is part of the stock inventory. Then the inventory of flowers. It is important to track what is in stock inventory regularly to record perishables, product need and completed orders. When doing bookkeeping, it isn't enough to account for the stock inventory costs. You must also account for the cost of goods sold. Many business owners inaccurately tally all the costs for supplies and labor to make the products and label this as the cost of goods sold.

However, this line item on the income statement only refers to the products already sold. This means that remaining supply values are not included when generating an accurate cost of goods sold. All the other numbers don't apply to this accounting line.