Inventory

Meaning

Inventory (المخزون) is the stock on hand: finished goods for sale, raw materials, work in progress, and consumables. It is a current asset valued at cost, which includes the purchase price, freight, customs duty and non-recoverable taxes, and written down to net realisable value when it could not be sold for its cost. Selling price is never used. Each sale moves the item's cost from inventory to cost of sales.

A perpetual system updates quantities with every receipt and issue and knows the balance at any moment; a periodic system finds it by counting. Either way the year-end count is what the auditor and the zakat return rely on. Weighted average cost or FIFO decides the cost of each issue; LIFO is not allowed under IFRS. Stock taken for private use or given away is a deemed supply for VAT.

Also called: stock · goods · المخزون

Example

Al Noor holds 40 shelving units bought at 620.00 and 120 boxes of paper at 68.00. A sale of 10 units moves 6,200.00 from inventory to cost of sales at weighted average. The year-end count finds 38 units, so two are written off at 1,240.00 and the balance sheet shows inventory at the counted value.