store accounting

Question 1

Stock Verification

Answer 1

actual counting, weighing and measuring of items in stock which is necessary to support stock value as per ledger balance.

Question 2

Objectives of Stock Verification

Answer 2

• To support the value of stock shown in the balance sheet through physical verification.
• To verify the accuracy of stock records.
• To disclose the possibility of fraud, theft or loss or deterioration.
• To reveal the weakness of the system, if any (i.e. whether the stock is in safe custody)

Question 3

Methods of stock verification

Answer 3

Periodic stock verification

Perpetual stock verification

Blind stock verification

Question 4

Periodic Stock Verification

Answer 4

• Physical stock verification is normally done periodically, i.e., once or twice in a year.
• Value of stock is determined by physical counting of the stock on a particular date.
• Suitable for smaller organizations.

Question 5

Blind Stock Verification

Answer 5

• Stock verifiers are given the location, but not details about code numbers, description and stock record balances in order to ensure a fair verification of stocks.
• Complete the verification and only then reconcile with the stock records.
• It is not very popular and it virtually serves no purpose when the operation of stores has to be well planned.

Question 6

Perpetual Stock Verification

Answer 6

• Physical stock verification is spread throughout the year according to a predetermined program. And each item is physically examined at least once a year.
• During physical verification neither the stores nor the works are to be closed.
• Surpluses and shortages arising from time to time can be written-off after proper investigation.

Question 7

Stores Accounting

Answer 7

The process of recording details of stock movements and balance in value.

Question 8

Priced Vocabulary of Stores

Answer 8

In order to ensure accuracy of posting of all transactions and facilitate the preparation and valuation of indents, a list of materials in stock, showing their correct description and identifying number (code) commonly known as ‘Priced Vocabulary’ of stores should be prepared on the basis of an up-to-date classification of stores,

It should be kept up-to-date by issue of correction slips, as and when necessary.

Question 9

The main account records of stores are :

Answer 9

(1) Bin Cards /Register of Bin Cards.
(2) Goods received sheets / Register of GRS.
(3) Indent / Summary of Indent.
(4) Summary of Stock Receipts / Issues.
(5) Priced Stores Ledger.
(6) Transfer Entries.
(7) Suspense Account.

Question 10

Receipt

Answer 10

Bin Cards

Goods Received Sheet

Question 11

Issues

Answer 11

Indentation Procedure

Issue Rate

Question 12

Bin Cards

Answer 12

Any material received or issued from store is immediately recorded in the Bin Card which always shows the quantity of materials available in the store

Question 13

Goods Received Sheet

Answer 13

After receipt of materials, and its scrutiny, a Goods Received Sheet is prepared
recording any discrepancies, surpluses or shortages or rejections and which is then forwarded to purchase and inventory control sections.

Question 14

Indentation Procedure

Answer 14

It is, therefore, desirable to have a proper indentation procedure so that issues are made under proper authority to users.
Indents or Requisition Vouchers are prepared by user departments or production shops drawing materials from stores.

Question 15

Issue Rate

Answer 15

For finding out the cost of finished items, it is essential that the cost of all component materials should be considered.
For this an Issue Rate is assigned to each article as it is brought on stock.
The rate is fixed, on the principle that the cost to be charged to works on which the materials are to be used

Question 16

Priced Stores Ledger

Answer 16

An account is maintained to record the transactions relating to each item of stock day to day. This is called Priced Stores Ledger having different sections of sets of pages for different articles of stock with columns for receipts, issues and balances for both quantities and values.

Question 17

Transfer Entry

Answer 17

Transfer entries are entries intended to transfer an item of receipt or charge from the account of a work in progress or of a regular head of account of another work.

Question 18

Stock-taking

Answer 18

It represents complete process of verifying the quantity balances of the entire range of items held in stock.

Measures to periodically count the stock is essential to check against discrepancies, deficiencies, shortages, surpluses, manipulations, mal-practice, etc

Question 19

Objectives of stock-taking are

Answer 19

(i) Verification of accuracy of stock records.
(ii) Reconciliation of value accounts with the actuals (ground realities)
(iii) Unearthing the possibility of fraud, loss, theft, pilferage or fictitious issues