Inventory Management January 11, 2024•3 min read
Is there a difference between inventory and stock—or are the words interchangeable? There is a difference. Learning what the terms mean will help you accurately account for the items your business owns and uses. And capturing the details in your inventory system can help you streamline business processes and get an edge on the competition.
Stock vs. Inventory: What's the Difference?
The difference between inventory and stock is a subtle but important one. Stock items are the goods you sell to customers. Inventory includes the products you sell, as well as the materials and equipment needed to make them. Although the definition of stock is concise, there are four main types of inventory: raw materials, work in progress, MRO supplies, and finished goods.
Stock
Stock includes finished products, parts, materials—whatever you sell to customers. The more stock—or products—you sell, the more revenue your business generates.
Inventory
Inventory includes finished products and all the assets a business owns or uses to complete production. There are four main types of inventory.
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1. Raw materials
Raw materials are parts or components used to make a final product. For example, if your company manufactures HVAC parts, the raw materials used to make fan motors, compressors, or thermostats might include:
- Metal
- Plastic
- Fiber or other materials
2. Work in Progress (WIP)
Work-in-progress, or work-in-process, inventory is still in production. Some examples are incomplete goods that require time to dry, seal, bond, or ferment before they are ready to be packaged and sold. And WIP includes raw materials, labor, overhead, and other essentials needed to complete production.
3. Maintenance, Repair, and Operating Supplies (MRO)
Items that support production but are not part of the finished product are MRO supplies. For example, if you’re tracking medical inventory for a company that manufactures continuous glucose monitors, production might be supported with these MRO supplies:
- Adhesives
- Calibrators
- Computers
- Gloves
- Packing materials
- Safety glasses
4. Finished Goods
Finished goods are completed products that are packaged and ready to be sold.
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Sortly for Tracking Stock and Inventory
As demand for stock grows, or as stock levels decrease, raw materials and MRO supplies must be available for production. How can you manage and track your stock and four types of inventory?
Sortly is aninventory management solutionthat helps you track, manage, and organize your inventory—from any device, in any location. We’re an easy-to-use inventory software that’s perfect for small businesses. Sortly builds inventory tracking seamlessly into your workday so you can save time and money, satisfy your customers, and help your business succeed.
With Sortly, you can track inventory, supplies, parts, tools, assets like equipment and machinery, and anything else that matters to your business. It comes equipped with smart features like barcoding & QR coding, low stock alerts, customizable folders, data-rich inventory reporting, and much more. Best of all, you can update inventory right from your smartphone, whether you’re on the job, in the warehouse, or on the go.
Whether you’re just getting started with inventory management or you’re an expert looking for a more efficient solution, we can transform how your company manages inventory—so you can focus on building your business. That’s why over 10,000 businesses globally trust us as their inventory management solution.
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FAQs
Stock items are the goods you sell to customers. Inventory includes the products you sell, as well as the materials and equipment needed to make them. Although the definition of stock is concise, there are four main types of inventory: raw materials, work in progress, MRO supplies, and finished goods.
What is the difference between inventory and stock? ›
It is, basically, what is available to serve customers and put products in their hands. In summary, stock is the supply of finished goods available for sale, and inventory includes both finished goods and components that create a finished product. In other words, all stock is inventory, but not all inventory is stock.
What is the difference between inventory and stocktaking? ›
The stocktake is an essential part of inventory management, influencing purchasing, production, and sales processes. Stocktakes do not only look at the quantity of items in your inventory, but also consider the condition of items. This means checking that items are in suitable condition to be sold.
What is the difference between stock and inventory on a balance sheet? ›
Accounting Treatment
Stock is usually treated as an asset on the balance sheet and is typically reported at cost or market value, whichever is lower. Inventory, on the other hand, is treated as a current asset, and is reported at the lower of cost or market.
What is the difference between inventory asset and stock? ›
Asset Stock refers to items which are used over a long period of time but are not tracked individually, e.g. cables and chairs. Inventory are items that are temporarily stored in a warehouse, or have a limited shelf life.
What are the different types of inventory and stock? ›
There are four different top-level inventory types: raw materials, work-in-progress (WIP), merchandise and supplies, and finished goods. These four main categories help businesses classify and track items that are in stock or that they might need in the future.
What is the meaning of inventory? ›
Inventory refers to all the items, goods, merchandise, and materials held by a business for selling in the market to earn a profit. Example: If a newspaper vendor uses a vehicle to deliver newspapers to the customers, only the newspaper will be considered inventory. The vehicle will be treated as an asset.
What is the difference between inventory and physical stock? ›
Here are the general definitions: Stock is the supply of finished goods available to sell to the end customer. Inventory can refer to finished goods, as well as components used to create a finished product.
How to calculate inventory? ›
Beginning Inventory = Sales (COGS) + Ending Inventory - Purchases (inventory added to stock). Sales (COGS) is the cost of goods sold, ending inventory is the inventory value at the end of the accounting period, and purchases are the total value of inventory added to stock during the accounting period.
Is inventory and closing stock same? ›
The Closing stock is the inventory which is still in your business waiting to be sold for a given period. The opening stock for the next reporting period is the same as the closing stock from the immediately preceding period.
An asset sale is the purchase of individual assets and liabilities, whereas a stock sale is the purchase of the owner's shares of a corporation.
Is it better to sell stock or assets? ›
The short answer is that a stock sale is better for you, the seller, while the buyer benefits from an asset sale. But, since we're talking about the IRS, there are infinite variations and complications. As such, you will want to get professional tax and legal advice before proceeding.
What is the difference between inventory and supplies? ›
Inventory is items subject to sale, rent or leases. Supplies are things consumed in your normal course of business.
Is stock in trade the same as inventory? ›
The difference between stock in trade vs. inventory is stock in trade is specifically related to sales. On the other hand, inventory has a larger scope and includes all assets held for production, distribution, and sale.
Is stock an example of inventory? ›
Stock is the supply of finished goods available to sell to the end customer. Inventory can refer to finished goods, as well as components used to create a finished product.
Is inventory the same as opening stock? ›
Opening stock is the cost of inventory of raw materials, WIP, and finished goods that an entity has on the initial day of its accounting year. Closing stock is the cost of goods inventory that an entity has on the last day of its accounting year.
Is inventory a stock of goods? ›
Every manufacturing Concern requires inventory for smooth flow of its activities. It is one of the most important assets and its turnover is the major source of the revenue for a business and ultimately shareholder's earning. The dictionary meaning of inventory is 'Stock of good' or 'List of goods'.
