Real Talk Co.

I’ll be explaining why are inventories included in the computation of net income.

Let’s get into it.

Why Are Inventories Included In The Computation of Net Income?

Inventories are included in the making of net income because it helps determine the cost of goods sold. The formula for this area of focus is beginning inventory + purchases + freight in – ending inventory – purchase discounts – purchase returns and allowances.

To Determine Cost of Goods Sold

Inventory FAQs

Do you include inventory in net income?

What is the relation of inventory and net income?

Why are inventories included on the balance sheet?

Why is inventory considered income?

How does inventory method affect net income?

Final Thoughts