International Accounting and Finance Degree BAB120 Lecture Notes - Lecture 6: Consignor, Purch Group, Weighted Arithmetic Mean
Document Summary
Even if the accounting records are continuously updated, companies that use a perpetual inventory system must still physically count inventory at year end for 2 purposes: To check the accuracy of their perpetual inventory records: to determine the amount of inventory lost due to shrinkage or theft. Determining inventory quantities, periodic or perpetual, involves 2 steps: determining the ownership of goods. Taking a physical inventory of goods on hand. Involves counting, weighing, measuring, each kind of inventory on hand. Generally more accurate when limited number of , or no, goods are being sold. Internal control:a process designed to help an organization achieve reliable financial reporting, effective and efficient operations, and compliance with relevant laws and regulations. The counting should be done by employees who do not have responsibility for the custody or record-keeping of the inventory as this would mean that they are checking the work that they have been responsible for.