Thesis: Inventory and Physical Counting

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  • Topic: Inventory, Inventory control system, Cycle count
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University of Hargeisa

The Importance of Physical Counting in Inventory Control

A research paper written as a partial fulfillment for the requirements of the academic award of BBA

Submitted by Mahad Hussein Abdi July, 2010

Submitted to the Advisor A/rahman Ali Hirsi

The Importance of Physical Counting in inventory Control


University of Hargeisa

CHAPTER ONE: 1. INTRODUCTION 1.1 Background of the study
This paper addresses the importance of physical counting in inventory control and 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 to ensure the accuracy of inventory balances reported in the Business's financial records but also help you manage the activity in your area. Physical counting in inventory control is placed on the procedures which have been developed to ensure the highest possible degree of accuracy in knowing what (quantity) and where (location) the material is stored at the distribution center. Management techniques involved in planning, scheduling, and conducting physical inventories.This will provide the background of appropriate physical inventory control specially Somaliland small businesses. and to research the importance of physical counting in inventory control. Inventory merchandise is one of the largest current assets of a retail store or of a wholesale business. The sale of this merchandise is the major source of revenue. In merchandising company, the inventory consist of all goods owned and held for resale to customers. Inventory is converted into cash within the company’s operating cycle and therefore, is regarded as acurrent asset.

The business starts each period with beginning inventory; the goods that are left over from the preceding period, during the period, the business purchases additional goods for resale. Together beginning inventory and purchases make up goods available for sale. The remaining portion or amount of inventory at the year-end is recognized as ending inventory for the period. 2 The Importance of Physical Counting in inventory Control


University of Hargeisa

1.2 Research problem Statement
The research problem of this study focuses on how Somaliland Small enterprises control their inventory and the importance of appropriate inventory accounting in the reliability of corporate financial statements and also the techniques they use to control their inventory. Therefore, the success of every enterprise organization depends on how its inventory is managed effectively and efficiently to attain the goals of the organization. Well managing businesses’ Inventories are most common factors that brings successful organizational goal.

1.3 Purpose of the study
Physical Counting in Inventory Control is a system that provides an easy way to protect potential loss of inventory. It also provides reliable corporate financial statements. Therefore, the general purpose of this study is to research how appropriate and consistent physical counting in inventory control contributes to the accurateness, trustworthiness of businesses financial statements as well as reporting, and reduces inventory losses.

1.3.1 Specific objectives of the Paper
o To Study inventory control of small businesses in Somaliland. o To understand how small businesses use costing methods of inventory. o To explore the importance of physical counting in inventory control. o To identify effects of inventory errors on the financial statement. o To know the usefulness of physical inventory control. o To identify the benefits of Accurate physical inventory

1.4. Method of data collection:
This research is descriptive research project, as its major purpose is to get a better understanding of the importance of physical counting in inventory control. The...
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