Define the cost components
Materials, labour, freight, production overhead and waste can require different treatment under the policy in use. We retain the supporting records and allocation basis. Recoverable taxes should not be mixed indiscriminately with costs capitalized into inventory.
Work orders and stock identifiers connect purchases to production and completed goods. Unit conversions, returns and goods held elsewhere need explicit records rather than assumptions made from the supplier invoice total.
Keep operational variances explainable
Usage differences, scrap and rework should be recorded with a reason and approval. They may affect management measures and accounting values differently. An unexplained adjustment to make stock match a target margin is not a reliable costing method.
Illustrative example: a small batch
A Burnaby workshop assembles 200 saleable units with $7,600 of costs included under a simplified approved method. The average is $38 per unit. If the method excludes administrative overhead or finance costs, the report states that limit instead of calling $38 the complete cost of running the business.
Questions about this work
Do you choose the inventory valuation policy?
The accountant determines the appropriate policy. We prepare and reconcile the records needed to apply it consistently.
Can you track unfinished orders?
Yes, using work-order status and supported cost allocations. The distinction between work in progress and finished goods must remain clear.
Put this into practice
Sources and current guidance
A practical next step
Bring the records you have.
We can identify missing information, agree on the scope and organize the next bookkeeping step.
Request a bookkeeping review