Business Administration 2257 Lecture Notes - Lecture 6: Internal Control, Perpetual Inventory

• School: Western University
• Department: Business Administration
• Course: Business Administration 2257
• Professor: Ian Dunn

Document Summary

All companies need to determine their inventory quaniies at the end of each accouning period by physically couning their inventory. Periodic inventory systems must take a physical inventory to determine the ending inventory and then to calculate the cost of goods sold for the period. Determining inventory quaniies involves two steps: taking a physical inventory of goods on hand, determining ownership of goods. Involves actually couning, weighing or measuring each kind of inventory on hand. An inventory count is usually more accurate when a limited number of foods are being sold or received during the couning. To make fewer errors in taking the inventory, a company should ensure that it has a good system of internal control. Couning should take place in teams of two: pre- numbered inventory tags should be used to ensure that all inventory items are counted and that none are counted more than once.