Question

Why is inventory valuation important to a company? Does management have the ability to switch valuation methods when they perceive an advantage for the company will transpire? Are you aware of any companies that have fraudently reported wrong inventory numbers? What would motivate a company or bookkeeper to report misleading inventory numbers? Why?

Answer 1

Inventory is one of the most significant asset and very important factor a company on its balance sheet. Inventory usually refers to the stock in trade with a company of raw materials; semi finished goods, and finished goods. Year ending the inventory has to be counted to get to the closing stock. In simple words about inventory importance is preparation of balance sheet for identification of the company position.

Valuation method is importance of the company, different methods of valuation are discussing below:

Variety of methods, comparisons, principal methods of valuation in these methods company use if any method for measuring the valuation. Valuations are help to company people for taking future decisions.

Fake financial statement for approximately 10 per cent of incidents concerning white collar crime. Asset misuse and fraud tend to occur at a much greater regularity, yet the financial impact of these latter crimes is much less severe. Financial statement fraud can outside in many different forms, although once deceptive accounting practices are initiated, various systems of manipulation will be utilized to maintain the appearance of sustainability.

Bookkeeping and accounting share two basic goals:

• to maintain track of your income and expenses, thereby improving your chances of making a profit
• to collect the necessary financial information about your business to file your a variety of tax returns and local tax registration papers

            Companies are increasingly using creative accounting to flatter their financial performance and increase payouts to management, and also showing the market share is very high that is help to selling more shares in future.