The Value of Stock - Taking in Business
Accounting for Stock in Small Businesses
If you are running a small business ,you probably know that stock taking is a sure way to track the quantity of items in stock. Also referred to as Inventory, these are tangible items for sale in a business.
It refers to resalable goods, goods for the manufacture of finished products,and can also be those goods that are partly manufactured.
Stock taking is a process of valuing stock and involves the actual counting and allocation of money values to items. It could take a day or even upto weeks .It actually depends on the nature of goods and the size of your business.
Value of stock is what actually determines the selling price of that particular item. The actual cost price should also be used to determine an item's true value .
Stock taking is important as it aides in keeping track of the business’ progress. It helps in determining the price and quantity of the various items in stock .
It aides the management in making future plans regarding the purchase of future stock , as non moving stock is done away with and is therefore not included in the next purchase. It also keeps in check dishonest deals that may have taken place .
In determining the value of goods in stock, one should consider various factors like the cost of the particular commodity, purchase pattern of that particular good and the current market price.
Stock taking aids in valuation and can be done continuously, which means regular checking and comparing of stock with the inventory balances. It is preferably done by staff who carry out work that is unrelated to store activities. It can be periodic ,meaning it is done once in a while or at the end of an accounting period. It is beneficial for businesses with a wide variety of goods for the purposes of accuracy.
The two Stock Records : Bin Cards and Ledger Cards are beneficial to this exercise.In terms of colour,size and type, bincards provide information about an item.They aid in determining the movement in the quantity of goods, informing on how much is in or out of stock. Ledger cards show changes in stock and includes price of items.It also shows the closing stock and facilitates pricing.