What is the investment of intermediates


Many different goods are created in an economy. It can be bothWere as well as aroundServices act. But the existing production chain for the creation of a good cannot always be seen for itself.

Rather, the stations of different products practically intersect. Because a created good can be used to complete another. A good can therefore be part of another product. If this is the case, this product is referred to as a so-calledIntermediate.

The intermediate product in the economy

The aim of every production process is to produce a finished end productthat is sold to a customer. In the case of particularly complex goods, however, it is necessary first to manufacture several intermediate productswhich are then ultimately put together to form the end product. Often these individual intermediate products are not produced in one company, but in different groups.

Not just from an economic point of view, also in terms of that Accounting the intermediate product is of particular importance. Because intermediate products must be booked separately, because they cannot be sold yet. Nevertheless, capital is already tied up in these goods, either through purchasing or our own production. In order to do justice to this, the intermediate products are also in the Balance sheet to be shown in a separate item.

Intermediate product: example from practice

In practice there are numerous examples of intermediate products, whereby these are produced in particular for more complex goods. Plant manufacturers, construction companies, car manufacturers and aircraft manufacturers in particular are affected by this. For example, an aircraft is made up of numerous components:

  • wing
  • Engines
  • Seats
  • Cockpit including the electronics
  • landing gear

The individual components of the aircraft are often not produced by the aircraft manufacturer themselves, but by suppliers. Because even the production of an engine requires a high level of know-how and expertisewhy the Division of labor worthwhile in this area. If the engine is at the aircraft manufacturer, it must be declared as an intermediate product. Because the company does not want to sell engines, but rather the finished aircraft. Sometimes the intermediate products are stored over several Balance sheet dates away from the aircraft manufacturer, because production can take years.

Intermediate - Definition & Explanation - Summary

  • An intermediate product is required for the manufacture of another good
  • Intermediate products must be shown separately in the balance sheet because they tie up capital but cannot be sold
  • The more complex and larger an end product, the more intermediate products there are usually