What is the agreement of stocks?

Inventory approval is a process in which the company balances its physical inventory with numbers in its accounting books. Two types of systems are available for inventory matching. Companies can use a periodic or permanent inventory system to perform this activity. Like names, the periodic inventory system requires reserves to reconcile in several different times a year, like every quarter; The permanent method does not have this requirement because the annual inventory is sufficient. In each system, a physical number of stocks is required to compare actual items with accounting messages so that accountants can make adjustments as needed.

Under each inventory system, the process begins with the same early step. An individual from the accounting department usually goes out and counts all the physical items listed as an inventory. A copy of the book inventory from a computer can help keep accounts when counting a physical inventory. Any difference between the inventory listed on the computer printing and the real inventory needs a brand inthe message. All supplies must be calculated before the reconciliation process begins.

Once the physical number is completed, the accounting can start the process of reconciliation. This process requires the accounting to compare their physical numbers with the items listed in the accounting system. Any differences and the resulting differences in dollars must have a clear registration in the reconciliation report. Accountants must find the reason for these differences and trace any terrible inventory. For example, inventory sold, but so far recorded in the accounting book, may result in a difference in accordance during the reconciliation process.

The purpose of the stock reconciliation process is double. First, the company reports more accurate data about its financial statumUns, profit and loss statement and balance sheet. The correct accounting statements and messages reflect the actual value of the company and allow the parties to be done better. Second, the exact stock balance may prevent tax overload. Government agenciesOU at the end of each year to charge taxes from an unsold inventory; Too many stocks at the end of the year increase these taxes.

Inventory approval can help the company prove that it has the right internal checks. The theft, the beach and the injured inventory can significantly increase the costs of the company to business. The inability to correctly control the costs associated with the inventory can quickly eat into the company's profits. Auditors often look at internal checks as part of the company's external control process. National accounting standards may also require compliance with the reconciliation procedures for certain types of companies.