Inventory
Internal control over stock
• Proper authorisation and approvals are needed to purchase stock.
• Detailed stock records are maintained, and movements are recorded correctly and promptly
in the appropriate journal.
• These records are validated by appropriate stock taking.
• When stock is delivered, items received are compared to the delivery note or purchase
invoice and discrepancies are reported immediately.
• Stock is safeguarded against theft and loss.
• Stock is insured.
• Access to stock is limited and supervised.
Stock systems
An administrative system which monitors, controls and records the movement of stock throughout
the business.
Perpetual stock system
Continuously records the value of stock on hand in the trading stock account, as well as the cost
price of goods sold (cost of sales account).
Sales – cost of sales = gross profit
Periodic stock system
Only shows the stock on hand (closing stock) value once a physical stock take has been done.
Cost of sales = opening stock + purchases + carriage + customs – closing stock
Gross profit = sales – cost of sales
= sales + closing stock – opening stock – purchases – carriage – customs
Internal control over stock
• Proper authorisation and approvals are needed to purchase stock.
• Detailed stock records are maintained, and movements are recorded correctly and promptly
in the appropriate journal.
• These records are validated by appropriate stock taking.
• When stock is delivered, items received are compared to the delivery note or purchase
invoice and discrepancies are reported immediately.
• Stock is safeguarded against theft and loss.
• Stock is insured.
• Access to stock is limited and supervised.
Stock systems
An administrative system which monitors, controls and records the movement of stock throughout
the business.
Perpetual stock system
Continuously records the value of stock on hand in the trading stock account, as well as the cost
price of goods sold (cost of sales account).
Sales – cost of sales = gross profit
Periodic stock system
Only shows the stock on hand (closing stock) value once a physical stock take has been done.
Cost of sales = opening stock + purchases + carriage + customs – closing stock
Gross profit = sales – cost of sales
= sales + closing stock – opening stock – purchases – carriage – customs
