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What is included in inventory in a business entity?

Items included are merchandise or stock in trade, raw materials, work in process, finished products, supplies that physically become a part of the item intended for sale, COD mail sales, and containers. 

Regarding merchandise, not everything is included. 

  • Those that are included are purchased merchandise if the title has passed to the taxpayer, goods under contract for sale that haven’t been segregated, goods out on consignment, and goods held for sale located away from the place of business. 
  • Restrictions include goods sold and title passed to the buyer, goods consigned to the taxpayer, and goods ordered to future delivery if the taxpayer has no title. 

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