Many organizations do not maintain a perpetual inventory control system. What considerations should be taken into account in such organizations, to ensure accurate results during the annual stock taking?

Management Accounting Block Revision Mock Exams

In order to ensure accurate annual stock taking results in organizations that do not maintain a perpetual inventory control system, the following procedures need to be followed:
1. Stock should be properly stored in separate bins to facilitate easy identification.
2. Stores should be well arranged so that stock items are easily seen.
3. A sound internal control and internal check system regarding custody and issue of stores should be in place.
4. Written instructions should be given to the stock taker and these should be followed during stock-taking.
5. Stock should be taken by persons other than the storekeeper or his staff.
6. On stock taking day, the business should be closed to customers to avoid interruption during the stock taking.
7. Cut-off procedures should be strictly followed.
8. Stock taking should be undertaken in the presence of a senior official whose duties should have nothing to do with stores.
9. One person should count stocks, calling out the quantities with another person doing the recording.
10. Stock-sheets should be used and re-checked by another person for accuracy.
11. Stocks belonging to third parties should be counted and listed separately.

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