197 stock verification no matter how diligently a

Info icon This preview shows pages 242–244. Sign up to view the full content.

View Full Document Right Arrow Icon
19.7 STOCK VERIFICATION No matter how diligently a store-keeper performs the custodial job or how carefully a ledger clerk maintains records (computerized or manual), some discrepancy between the actual and book balances of inventory is bound to occur. The system is operated by people, and people do commit mistakes. For this reason, every inventory item should be physically counted and checked against its book balance at least once in a year. The books are subsequently adjusted to match the actual count. Most companies create an “inventory discrepancy” or inventory short and over” account to absorb such discrepancies. This account is eventually closed by transferring the balance to manufacturing overhead account. Stock verification can be conducted in one of the three ways: 1. Periodic verification or fixed annual inventory. 2. Perpetual or continuous inventory. 3. Low point inventory. Under the low point inventory method companies take physical inventory when the stock is the lowest, irrespective of the period. Stock taking is naturally irregular. The low point approach minimizes the time required for actual inventory work because of the small quantities of materials involved. However, it has the disadvantage of producing an irregular inventory schedule which tends to peak the work load for stores personnel. In the continuous inventory approach , at the beginning of each year some firms divide their inventory into 52 equal groups and assign one of them to be physically counted each week. Thus, the physical inventory operation goes on
Image of page 242

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
237 without interrupting production operation or upsetting store room activities. This approach has three advantages. It can be planned and worked into scheduled activities without a shutdown. It can be conducted in an orderly and relaxed manner; these conditions are also conductive to accurate work. Secondly, there is the possibility of detecting and eliminating causes for discrepancies without allowing them to continue throughout the year. Finally, this approach facilitates efficient utilization of stores personnel. In many store-rooms, withdrawals are heavy early in the day and are much lighter later on. Thus, when the issue clerk’s busy work slacks off, he will have backlog of inventory work to do. 19.4 REVISION POINTS 1) Highlight stock accumulation, discrepancies and abnormal consumption and effect control measures. 2) Ensure good housekeeping so that materials handling, materials preservation, stocking, receipt and issue can be done adequately. 19.5 INTEXT QUESTIONS 1) Differentiate fixed location and random location. 2) Explain Periodic verification or fixed annual inventory. 3) What is low point Inventory? 19.6 SUMMARY This lesson covered with stores, functions of stores, stores layout and storage system. Storage system is the function with controls the storing of materials, finished parts and supplies in a factory. Ensure good housekeeping so that materials handling, materials preservation, stocking, receipt and issue can be done adequately.
Image of page 243
Image of page 244
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern