Accounting & Bookkeeping Routines – The Stock Take
Mar 09 2017
Carrying out a stock take is a very important accounting and bookkeeping procedure. Any business that deals in a physical stock should carry out a stock take on a regular basis. It is fundamentally the process of counting, weighing or measuring all of the stock held by a business at a point in time. The procedure is most commonly carried out at the end of a business’ financial accounting year end. However, a stock take can be undertaken quarterly, monthly or even weekly as part of the management accounting process. The opening and closing stock figures feature in the profit and loss account when calculating the gross profit for a trading period. In addition, the closing stock figure is included in the balance sheet under current assets. Therefore, any stock and the value associated with it will have an effect on the financial performance and financial standing of a business.
There are many benefits to carrying out a thorough stock take, firstly, it can help to verify the accuracy of the general stock recording system maintained by a business. Indeed, any weaknesses relating to the custody and control of stock can be identified and addressed by the owners or managers the business. Carrying out a stock take can also highlight any discrepancies that have resulted due to theft or fraud. If theft or fraud is left undetected it can seriously damage the trading activities and profit of a business.
A stock take can help provide us with information about the stock movements during the year and the stock on hand at the end of an accounting period. This information is essential as it can help a business to deal with slow moving items. Some items of stock may be identified as obsolete or damaged and thus may need to be written-off against the profits in the profit and loss account. Carrying out a stock take can also help to ensure that any movements in terms of sales and purchases during a period have been accounted for correctly.
In order to carry out a proper stock take a good deal of preparation is necessary; a physical count should take place at an agreed time in all the locations where the stock is held by a particular business. While the stock take is taking place the warehouse or shop should not be open for normal business or operations. However, if the stock take is carried out during normal business hours, any movement in terms of stock ‘ins and outs’ on that day should be monitored and consequently adjusted for. It is also crucial that the staff assigned to the stock take have the appropriate skills and knowledge to carry out their duties. The physical count of stock items should be entered on serially numbered stock sheets with a full description of stock items, the quantities present and other cost data if relevant at this stage. All the stocks should be counter-checked upon entry on the stock sheets.
In conclusion, any stock take undertaken should be planned out thoroughly so that it can be completed with minimal disruption to the business and its activities. It should also provide information as regards any errors or other discrepancies relating to stock and ultimately support the credibility of the figures reported in the accounts of the business.
For more stock taking information and advice, contact Synergy Stocktaking!