Hello, I'm a techie, not an accounting guy. However, I'm studying accounting and finance on the side for investing purposes and growth. I'm currently readi ng a very basic book dealing with financial statements. My question is abo ut inventory. The book states if inventory increases then cash has decreas ed and if inventory decreases cash has increased.
However, wouldn't this depend on whether you actually paid cash or received
cash for the inventory?
Here's how I see it. Maybe you purchased the inventory on credit? Maybe y
ou sold the inventory on credit increasing account receivable? I both case
s, no cash has actually went into or out of the business.
Thanks in advance for any assistance.
- posted 6 years ago