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

• School: Western University
• Department: Business Administration
• Course: Business Administration 2257
• Professor: Eleni Petrou

Document Summary

Companies need to determine inventory quantities at end of each accounting period by physically counting their inventory. Perpetual inventory = constantly updates inventory to show quantity and cost of inventory that should be on hand. Does not mean perpetual account reflects what is actually on hand. Companies still need to perform a physical count at year end for two purposes. Determine amount of inventory lost from shrinkage or theft. Periodic inventory = quantities are not updated on continuous basis. Must take a physical count to determine ending invnetory at end of period. Determining inventory quantities whether in perpetual/periodic requires two steps: Taking a physical inventory of goods on hand and. Companies take a count when business is slow or when it is not open. Internal control contributes to reducing the number of errors in inventory count. Internal control = process designed to help an organization to achieve reliable financial reporting.