The accountant’s problem
The file keeping and book keeping systems may vary among different companies. The ledgers and accounts are almost same, the tax filings and brackets are different for many firms. A small and medium enterprise may charge a different accounts system. The window-dressing techniques and some off-balance sheet conversion are even same. For example, transferring the LC (Letter of Credit), this gives more capital in the firm.
Even the inventory management procedures are different. The LIFO, FIFO or the average method could be used in a different firm. Also the perpetual and periodic inventory management systems are used for excess stock.
You need to set a criterion for excess components. Your sales projections may be wrong or either you may have recorded too much as inventory on your balance sheets. Also, the excess stock problem may arise. How you determine what items come under the excess stock and how can you get rid of these? Even if your forecasts are optimistic, which cause inventory to grow as the same percentage as the sales growth, your accounting treatment can fluctuate.
Or even if you think of some surplus electronic components, some balance sheet criterion needs to be set as well. Even if you think that your inventory is losing its value, you must know well what accounting depreciating methods is being used by your accountants. For example, a vehicle firms depreciates the vehicle value by either the number of miles traveled. Some straight line methods would also be seen and a salvage value, that remains after complete depreciation.
