Physical Inventory Guidelines

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  • Topic: Cycle count, Physical inventory, Inventory
  • Pages : 12 (2745 words )
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  • Published : March 1, 2013
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Physical Inventory Guidelines
Purpose
This document provides guidelines for conducting annual physical inventories, and is applicable to all units that hold inventory for resale to external or internal customers. Annual physical inventories not only help ensure the accuracy of inventory balances reported in the University's financial records but also help you manage the activity in your area. While these guidelines address annual physical inventories, similar concepts apply to cycle counting, but the specific steps are different. Cycle counting is a process that uses regularly scheduled counts but does not count the entire inventory in a single event. Please contact the Controller's Office Business Operations Department at 3-0781 for guidance. The document consists of the following sections and supplemental information in the appendices.

Table of Contents
Purpose ...........................................................................................................1 Responsibilities ................................................................................................2 Planning for a Physical Inventory .....................................................................2 Conducting the Physical Count ........................................................................5 Reconciling the Physical Inventory ..................................................................6 Appendix ..........................................................................................................8 A: Sample Inventory Tag ..........................................................................8 B: Sample Instructions for a Physical Inventory ........................................9 C: Sample Inventory Reconciliation ........................................................11 D: Sample Report 161 Posted Journals ..................................................12 E: Sample Report 138 Invoice Detail ......................................................13 F: Sample Report 206 Purchase Order Detail.........................................14 G: Sample Inventory Adjustment Journal................................................15

Rev. 2, 17-OCT-2007

page 1

Physical Inventory Guidelines

Responsibilities
The Finance or Business Manager of the unit is responsible for ensuring the annual physical inventory is properly performed, inventory records reflect actual quantities on hand, inventory valuation methods are appropriate, and adjustments are entered in the University's accounting system on a timely basis. In addition, the Finance or Business Manager is responsible for ensuring that segregation of duties is maintained throughout the inventory process to promote the safeguarding of the assets, protection of employees, and objective reporting of inventory. Specifically, no one person should be able to authorize a transaction (e.g., a purchase or sale), record the transaction, have custody of the inventory, and perform the related reconciliation.

Planning for a Physical Inventory
Time spent planning and preparing for the physical inventory will streamline the count process and reduce errors and rework. A. Clearly define roles and responsibilities. In general, the inventory counting process and the reconciliation should be supervised or performed by an independent person. This independent person should NOT be the person who checks in or receives inventory, maintains the inventory records for the items, or is responsible for the daily security and accountability of the inventory. An example of participants' possible responsibilities follows: 1. Manager: plans and supervises inventory, makes test counts, approves adjustment journal. 2. Staff Member #1: tabulates physical count and identifies possible errors. 3. Staff Member #2: reconciles physical count to Oracle Financials; creates adjustment journal. 4. Count teams: count the stock on hand. The number of people involved will depend upon the size and...
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