Inventories Research Essay

1. SUMMARY In this research, group members are required to choose any company from bursa Malaysia and study about their inventories, during this coursework, we mainly focus on the general study about inventories and the inventories of the company- Ajinamotoâ„ ¢ 2. INTRODUCTION Inventories refer to a company’s merchandise, raw materials, and finished and unfinished products which have not yet been sold. These are considered liquid assets. There are various means of valuing these assets, but to be conservative the lowest value is usually used in financial statements. The LCM rule is applied. 3. CONTENT * Types of inventories There are mainly 5 types of inventories for Ajinomotoâ„ ¢ raw materials (eg. Raw husk monosodium glutamate etc.) amounting to RM34,445,868, consumables amounting to RM 4,536,693, work-in-progress amounting to RM2,374,316, and finished goods amounting RM21,445,751. These are the closing inventories for Ajinomotoâ„ ¢ * Manufacturing process. Ajinomotoâ„ ¢ uses green technology such as bio-cycle technology which improves amino acid, maximizing the usage of natural resources, such as water and energy, the above diagram show the manufacturing process. The main raw materials are raw husk. * Valuation methods Ajinomotoâ„ ¢ uses weighted average method. Inventories are stated at the lower of cost and net realisable value. Cost incurred in bringing the inventories to their present location and condition are accounted for as follows : * Raw materials : purchase costs on a weighted average method. * Finished goods and work-in-progess : costs of direct materials and labour and a proportion of manufacturing overheads based on normal operating capacity. These costs are assigned on a weighted average method. Net realisable value is the estimated selling price in the ordinary course of business less estimated costs of completion and the estimated costs necessary to make the sale. * Amount of Closing Inventories The amount of closing inventories is RM 62,802,628. This can be acquired from the financial statement of Ajinamotoâ„ ¢ of year 2011 4. ADDITIONAL CONTENT * FIFO(First In First Out) is an asset-management and valuation method in which the assets acquired first are sold, used or disposed of first. FIFO may be used by an individual or a corporation. For taxation purposes, FIFO assumes that the assets that are remaining in inventory are matched to the assets that are most recently purchased or produced. * Weighted Average Cost is a method of calculating Ending Inventory cost. Inventory valuation method used where different quantities of goods are purchased at different unit costs. Under this method, weights are assigned to the cost price on the basis of the quantity of each item at each price. It is also known as AVCO It takes Cost of Goods Available for Sale and divides it by the total amount of goods from Beginning Inventory and Purchases. * Taxation is a means by which governments finance their expenditure by imposing charges on citizens and corporate entities. Governments use taxation to encourage or discourage certain economic decisions. For example, reduction in taxable personal (or household) income by the amount paid as interest on home mortgage loans results in greater construction activity, and generates more jobs. 5. Conclusion After done this research, my group members and I increased our knowledge and comprehension about the company’s annual report. This can help us more understand about the accounting for inventories. This are useful for us as a future accountants. We get more extra information that can’t learn from the class. It also increase our leadership and communication skills with other group members. Besides that, before start our assignment we also learn how to build up a group successfully. We put a lots of efforts and times in order to make this assignment more wonderful. We sincerely hoped that our efforts is worthful. 6. Reference http://www.ajinomoto.com/about/history/index.html http://www.ajinomoto.com/about/ http://www.ajinomoto.com/ir/stock/info.html http://www.ajinomoto.com/ir/financial/financial_summary.html http://www.investorwords.com/2589/inventory.html http://www.businessdictionary.com/definition/taxation.html http://www.businessdictionary.com/definition/weighted-average-cost-of-inventory.html http://www.investopedia.com/terms/i/inventory.asp#axzz1fSj9WniT http://www.ehow.com/ehow_radlinks_ads.html?term=Inventory+Example&channel=biz_business_management,text,suggested5&google_rt=ChBOiX2xAAdWbgriAMoOXR1TEhFJbnZlbnRvcnk http://www.agecon.purdue.edu/crd/localgov/Second%20Level%20pages/topic_inventory_tax.htm