Physical Inventory – Inventory Valuation:

Even with a perpetual inventory system, periodic physical counts are necessary to discover and eliminate description between the actual count and the balances on materials ledger card.

 These descriptions may be due to:

Errors on transferring invoice data to the cards; mistakes in costing requisitions; unrecorded invoices are requisitions; or spoilage, breakage, and theft. In some enterprises, plant operations are suspended periodically during a seasonal low period or near the end of the fiscal ear while a physical inventory is taken. In others, an inventory crew or members of the internal edit department make a count of one or more stock classes every day throughout the year, presumably on a well planned schedule, so that every materials item will be inventoried at least once during the year.

You may also be interested in other useful articles from “controlling and costing materials” chapter:

1. Purchases of productive material
2. Purchases of supplies, services, and repairs
3. Materials purchasing forms
4. Receiving materials
5. Invoice approval and data processing
6. Correcting invoices
7. Electronic data processing (EDP)  for materials received and issued
8. Cost of acquiring materials
9. Storage and use of materials
10. Issuing and costing materials into production
11. Materials ledger card – perpetual inventory
12. First-in-First-Out (FIFO) Costing Method
13. Average Costing Method
14. Last-in-First-Out (LIFO) Costing Method
15. Other Methods-Month end average cost, last purchase price or market price at date of issue, and standard cost
16. Inventory valuation at cost or market whichever is lower
17. American Institute of Certified Public Accountant (AICPA) cost or market rules
18. Adjustments for departures from the costing method used
19. Inventory pricing and interim financial reporting
20. Transfer of materials cost to finished production
21. Physical inventory
22. Adjusting Materials Ledger Cards and Accounts to Conform to Inventory Accounts
23. Scrap and waste
24. Spoiled goods
25. Defective work
26. Discussion Questions and Answers about Controlling and Costing Materials

Other Related Accounting Articles:

• Cost or Market Whichever is Lower–Inventory Valuation
• Transfer of Materials Cost to Finished Production–Inventory Valuation
• Electronic Data Processing System (EDP System) for Materials Received and Issued
• Inventory Pricing and Interim Financial Reporting – Inventory Valuation
• Purchase of Productive Materials
• Correcting Invoices
• Purchase of Supplies, Services, and Repairs
• First In First Out (FIFO) – Materials and Inventory Costing Method
• Materials Ledger Card–Perpetual Inventory
• Storage and Use of Materials