Integrating inventory flows into a 3-statement financial model can be one of the more difficult things to figure out. It requires a good understanding of general Accounting principles as well as the Accounting equation. This is especially true when you have inventory that is paid on account partially or in full and then actually hits the cash flow at some future period.
The model designed here will help anyone understand how inventory should be flowing to each financial statement if one were building a financial forecast for a business that had to deal with inventory purchases, repayments, prepayments, and accounts payable items related to the inventory transactions. The main line items that inventory effects are included and all the math and logic needed to balance the Balance Sheet with the Income Statement and Cash Flow Statement as it relates to inventory movements.
There is an additional schedule that really dives into what is happening each period in terms of the items and amounts that change in a given period as it relates to inventory.

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