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Stockroom management must ensure:
The manager of the stocktaking team must control all supervised stocktaking to ensure that all members are properly briefed on their duties and responsibilities.
While the accuracy of the physical count is important, the need to verify that all outstanding documentation is accounted for and recorded in the appropriate accounting period, cannot be overemphasized.
All change funds, petty cash funds, and other funds that could affect inventory accountability must be verified but are not included in the inventory. Attach copies of the verifications to the stocktaking report.
Different organizations have different forms used in stocktaking. The forms are serially numbered. All stocktaking form numbers shall be recorded on the issue in an Accountable Document Control Register in accordance with organizational procedures checked off on completion of the stocktaking.
Prior to the start of a supervised stocktaking, the manager should ensure that:
The manager, prior to a scheduled supervised stocktaking, shall provide management with formal advice confirming that the action, as outlined in the organizational stocktaking procedures, is complete. Where supervised, carry out stocktaking on a surprise basis. The management shall obtain confirmation from the stocktaking supervisor that all merchandise, cash, and credit documents are included in the count and that all merchandise is either in a saleable condition or has been recorded on an RPC.
The most common procedures for counting are:
Stocktaking forms shall be extended and totalled as quickly as possible. Accuracy and speed in completing the inventory are important, therefore, management utilizes all available resources for this task, and if deemed necessary, employs an outside source of services to complete the extensions or, hire extra part-time help.
On the day of stocktaking, the stocktaking team shall:
The stocktaking team shall record the selling price and department of all outstanding repair tags covering accountable merchandise returned for repair, following organizational procedures.
It is the audit procedure for determining whether a transaction took place before or after an accounting period. It assures that the transaction has been recorded in the proper period. It is the date chosen to stop the flow of transactions, merchandise, cash, and so, on for audit purposes. For example, in taking a physical inventory, there must be a cut-off date applicable to sales and purchases. This may require closing receiving and shipping rooms while the inventory count takes place. Transactions of one period must be differentiated from those of another. Cut-off errors must be avoided diligently when recording transactions.
It is important to have good cut-off procedures, so stock is recorded accurately, as this has the potential to affect the calculation of gross profit. The more stock you carry, the more important this becomes.
You need to be careful with items of stock that arrive around balance dates. Goods arriving during the last week of the year should be monitored with extra care.
If you receive a shipment of stock items on the balance date, you will generally be invoiced for them on that date and the invoice will be included in your Accounts Payable. If that is the case, the stock also needs to be included in your stocktake.
Cut-Off Procedure Example:
For example, assuming a March balance date, make sure all stock arriving on or just before the balance date is:
If you have good, inwards goods procedures in place, it will be easier to have good cut-off procedures. Incoming goods need to be:
On completion of the physical count, all stocktaking sheets shall be handed to the supervising member of the stocktaking team. All stock sheets must be accounted for. Under no circumstances is a sheet destroyed, and voided sheets must be clearly marked. The stocktaking sheets shall then be delivered to management, depending on organizational procedures, attached to a Certificate of Stocktaking.
In instances where there is an inventory shortage, the following course of action is implemented:
Where an organization makes use of professional stocktaking teams, they shall be hired and controlled by the management of the organization. The results of professional stock takers are delivered to the management of the organization. In most cases, professional stock takers are not required to record the results of their count on stocktaking forms. It is normal practice that only a gross count by a department is recorded.
To enable the auditor performing the annual audit to express an opinion concerning the fairness of stated inventory levels, management only requires a random sample check (red check) of merchandise by personnel. This check is conducted while the professional teams perform their count.