Inventory Verification helps the company reduce the loss of inventory to a great extent, providing assurance to the management that the inventory reflected in the financials are reliable.
Inventory is the most valuable asset of any company and is most susceptible to pilferage, fraud, wastage, or damage.
As per International Accounting Standards ( IAS 2), inventories are the asset held for sale in the ordinary course of the business, In the process of production for resale, and in the form of materials or supplies to be consumed in the production process or the rendering of services. As per IAS 2. Inventories are measured or valued at a lower cost or net realizable value.
Inventory Verification or Stocktaking is a physical checking of stock of goods or inventory in the store after a regular interval of time. Inventory Verification or Stocktaking is made periodically, normally made at the end of the financial year at the time of finalization of accounts.
Meet legal requirements – While setting procedures, all legal requirements and compliances will be ascertained ensuring that the company is abiding with the laws of the land.
Establish Chain of Command – Defining a hierarchical structure will provide direction to the employees while performing their duties enhancing the effectiveness and reducing the time involved in obtaining permissions
Helps transfer of work easily – Once the data process is defined, an employee will be able to carry out the tasks purely based on the set procedures. This will enable new recruits to adapt to the work easily.
The objectives of Inventory Verification are to:
The Inventory Verification method is classified into two; cost price method and selling price method.
The main purpose of conducting an inventory verification is to prove the existence of the existing stock and determining its realizable value. Inventory is an asset that has multiple movements a day, and hence daily inventory verification is a tedious task for any business.
Stock management is an essential part of achieving overall company goals. Stock management is the process of keeping and maintaining a proper stock or inventory level in the business and making the availability of stock when it is required in the business. Physical stock control is describing Receiving, Movement, Storing, and overall physical control of inventories.
Types of inventories are Raw materials, work in progress, finished goods. The items which are used to make the product of the business is called raw material. The semi-manufactured or semi-finished products in the business are called work in progress and the completely manufactured or finished products in the business are called finished goods. The amount of unsold goods in the business is called stock. The amount of unsold stock at the start of the period is called opening stock/ opening inventory, and the amount of unsold stock at the end of the period is called closing stock or closing inventory.
The movement of Stock/ Inventory in the business is called stock turnover. Stock turnover is also called inventory turnover. The stock turnover ratio is the relationship between the cost of goods sold or the cost of sales and average stock or average inventory. Stock turnover ratio- Cost of goods sold/ Average inventory. Inventory turnover ratio as a technique of material control is useful to avoid unnecessary investment on those materials whose consumption is much less. In addition to this, it also helps to avoid obsolescence of stock and incurring unnecessary storage costs. The amount of goods sold in the business is called the cost of sales. Cost of goods sold = Opening stock+ Purchases- closing stock. The average of opening stock and the closing stock is called average stock. The average stock is also called average inventory. Average stock= Opening stock+ closing stock/ 2. Stock or inventory turnover ratio may be denoted in terms of the number of days in which the average inventory is consumed. The stock turnover ratio in terms of days. Days of year/ Inventory turnover ratio.
The stock management systems are the process of managing the stock of goods in the organization. Mainly two systems used in stock management, the Periodic inventory system, and the perpetual inventory system.
The periodic inventory system is an inventory system in which updates in the stock of the goods are made on a periodic basis. It is also called a physical inventory system.
The perpetual inventory system is an inventory system in which updates in the stock of goods are made on a continuous basis.
The stock management methods are the techniques for calculating the value of the stock of goods in the organization. The comely used methods used in stock management are First in First out and Last in first out.
Under the First in First out method stock items are issued in the order in which they are received in the store. The goods received first will be issued first. First come first served. In other words, old stocks are issued first, and the stocks will be issued afterward. As a result of this method when we value the closing stock of goods, that will be at the latest price.
Last in first out method is opposite to the first in first out method. Here the stock items received last are issued first. Issues are made from the latest purchase. The issues are priced from the unit cost of the latest lot or the most recent purchase.
Inventory Verification Services in the Ghana are provided by PISTIS And Associate by conducting verification of inventory with proper planning and expertise, thus validating the existence and location of the various inventory possessed by a company. Our Inventory verification service in the Ghana includes the following:
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