Inventory Management Is a Key Aspect of Working Capital Management

question 24

Essay

Inventory management is a key aspect of working capital management.
Discuss the objective of inventory management including why companies hold inventory and the approaches to managing inventory levels.

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Definitions:

Recording Process

The act of documenting financial transactions systematically in the books of accounts of a business.

Journal

An elaborate log that captures every financial transaction of an enterprise, initially entered prior to its transfer to the accounts within the general ledger.

Ledger

A comprehensive collection of accounts that records all financial transactions of a business, serving as the principal book for accounting.

Trial Balance

An accounting report that lists the balances of all ledger accounts to ensure that debits equal credits, used for internal checks.