Bookkeeping for Inventory and Expenses

Inventory:

Inventory is usually the largest current asset of a business that sells products. If the inventory account is greater at the end of the period than at the start of the reporting period, the amount the business actually paid in cash for that inventory is more than what the business recorded as its cost of good sold expense.  When that occurs, the accountant deducts the inventory increase from net income for determining cash flow from profit.

Expenses:

The prepaid expenses asset account works in much the same way as the change in inventory and accounts receivable accounts. However, changes in prepaid expenses are usually much smaller than changes in those other two asset accounts.
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