Accounting Treatment of Inventory and Its Impact on Commercial Enterprises

The objective of this study is to analyze the accounting treatment of inventory in commercial companies and how it influences their financial statements and decision-making. Inventory represents a crucial asset for these companies, as it constitutes an important part of their working capital, and its proper management is essential to reflect the real economic situation. The accounting treatment of inventory involves its valuation, recording and classification in the financial statements. The most common methods for valuing inventories are the weighted average cost method, the specific identification method and the FIFO (First In, First Out) method. Choosing an appropriate method can affect the cost of sales, final inventory, and profitability of the company. For this analysis, quantitative and qualitative methods are used, reviewing the current accounting regulations and analyzing case studies of commercial companies belonging to the Chamber of Commerce of Quevedo. It is concluded that inadequate inventory management can generate distortions in financial results and affect strategic decision-making, which highlights the importance of having an efficient and transparent accounting system.