Although stocks of materials may be planned to maximize profitability, when stock record cards are compared to actual physical stocks, differences often arise. Explain possible reasons for these differences.

Management Accounting Block Revision Mock Exams

(a) Possible causes for differences between stock record cards and actual physical stocks include:

(i) Losses due to:
(a) evaporation
(b) shrinkage,
(c) theft
(d) obsolescence and deterioration.

(ii) Differences due to items in transit either to/from the store.

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