Physical Inventory – Inventory Valuation

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:

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