Goodwill Learning World: Age Wise Inventory Report with Standard Costing in Tally

Aged Stock Analysis (Ageing Analysis)

A very important function of Working Capital management is monitoring stocks. Money locked up in stocks can adversely affect the liquidity of a company and every company strives or should strive to reduce stock levels to the optimum. Every business would prefer to dispose of older stocks as they might deteriorate with time, go out of fashion, or simply get forgotten.

The aging inventory report showing by inventory item the amount of inventory that may have been kept from 30 to 60 days, 61 to 90 days, 91 to 180 days, and 181 to 360 days, and over 360 days can be prepared to understand the inventory status of the company at any point of time. The amount shown over each period of time could tell the management regarding the problems such as:

Slow-moving items – the raw materials or finished goods that are getting old can depreciate in value. This will definitely incur future loss from inventory scrap or high discount for finished products.

Obsolete inventory – it’s possible for the very long aging items to be obsolete and cannot be used either for production or sales purposes. These inventories are to be eliminated at the end.

Discontinued inventory – a product ending its life cycle by the replacement of a new model or design. This can result in either discontinued raw materials or finished products. Companies need to have a good plan to ensure the smooth phase-out.

An aging analysis can also be applied to liability accounts so that clearer picture of the company’s obligations can be obtained. In the fast-moving business pressure today, an aging of non-financial transaction can be as important as the financial one.

Age Wise Inventory Report with Standard Costing in Tally