The dual purpose of a physical stock take is to ensure:-
Note that stocks or inventories comprise raw material, work-in-progress or completed product. Any discrepancies between the book stocks and physical count must be investigated and reconciled otherwise the profit of the business will not be accurate. Note that physical stocktaking may not be possible on the accounting date – the actual count is normally carried out a few days before or after the accounting date. So what should we do? The answer is to ensure that all transactions that took place between the count date and Balance Sheet date must be noted and all adjustments must be made to arrive at the actual figure at the Balance Sheet date. Illustration: Question: Company A ‘s year end accounting date is on 31 st Dec. However, it conducted its physical stock take only on 5 th January. The details as follows: Actual value of stock at date of stocktaking re: 5th January = $5,050 Following transactions took placed between Jan 1 to Jan 4: (a) Goods received $510 (b) Sales during the period $420 where cost of sales is $300 (c) Goods stored at other places were not included $610 (d) Some of the stock sheets were overcast by $110 (e) Third party stocks of $480 were included in the count Solution: Company A needs to prepare a statement of adjusted stock at 31 st December to reconcile all transactions that took place between the count date and Balance Sheet and all adjustments must be made to arrive at the actual figure at the Balance Sheet date. STATEMENT OF ADJUSTED STOCK AT 31 ST DECEMBER Stock value at 5 th January $5,050 Add: (b) Cost of sales not included $300 (c) Goods stored at other places $610 Less: (a) Goods received and included ($510) (d) Stock sheets overcast or overstated ($110) (e) Third parties included ($480) STOCK VALUE AT 31 ST DECEMBER $4,860 |