There are a plethora of reasons why the dollar amount of a company's inventory in the...

There are a plethora of reasons why the dollar amount of a company's inventory in the accounting records differs from the dollar value of the physical inventory count. Obviously theft by employees and customers is one reason for the disparity, but there are many others. In one-paragraph discuss another reason why the physical inventory count may not agree with the amount of inventory in the accounting records. Then discuss a strategy or internal control measure to put in place to safeguard against that loss.

Could you please explain answer in more detail?

Expert Solution

REASONS FOR DIFFERENCE BETWEEN VALUE OF INVENTORY IN ACCOUNTING RECORDS AND PHYSICAL INVENTORY COUNT:

As stated in the question the prime reason is the theft by employees and customer, but that is not the only reason there are wide range of reasons namely:-

There can be damage in stock which is not recorded in the books but found at the physical inventory count
Various human errors can be factors such as wrong labelling of the inventory, misplacing the inventory or storing it in a different location
Another important reason can be the incorrect measurement , that is recording a measurement but in reality it differs.
There can be situations where the inventory register is managed by a software and there exsists technical faults in the software.
A product in the inventory mistaken for another product i.e labelled or sold in a different name can also be cause
At times there can even be situations where product is returned and which is duly accounted but not placed back in the storage location.

VARIOUS INTERNAL CONTROL MEASURES TO REDUCE LOSS DUE DISPARITY IN VALUE OF INVENTORY IN BOOKS AND IN ITS PHYSICAL COUNT

Bring in personal accountability to the inventory inward and outward register. a person should be made accountable for the same
Reduce human errors by bringing in proper controls on correct labelling , more organised storage locations and proper measurement
The inventory management should continously updated constantly checked
A more frequent stock checking routine and reconciliation of the inventory , purchase and sales registers

ekkarill92 answered 1 year ago

Required: 1. Determine the dollar amount of cost of goods sold, dollar amount of ending inventory,...

Required: 1. Determine the dollar amount of cost of goods sold, dollar amount of ending inventory, and dollar amount of gross margin using the FIFO, LIFO and specific identification inventory costing methods for the month of October. 2. Complete journal entries for October 3rd and 8th using the specific identification method assuming all purchases and sales were on account. Beginning Inventory Units 1 – 5 at $24 each 120 October 3 Purchased Units 6 – 15 at $25 each 250...

Four possible reasons why company's choose to prepare an integrated report.

a) Explain 5 reasons why investors often see a cut in a company's dividend payment as a...

a) Explain 5 reasons why investors often see a cut in a company's dividend payment as a negative signal.

Discuss the reasons why we need to have methods of anticipating the amount customers will fail...

Discuss the reasons why we need to have methods of anticipating the amount customers will fail to pay of Accounts Receivable. (Allowance method and Percent of Sales method)

1. a) If a dollar is always worth a dollar, why do people say the dollar...

1. a) If a dollar is always worth a dollar, why do people say the dollar has ‘lost its value’? b) Explain the real rate and nominal rate of interest? Which is more relevant?

State several reasons why we must quantitate the amount of DNA that we isolate. Then state...

State several reasons why we must quantitate the amount of DNA that we isolate. Then state and describe 5 ways that we can quantitate DNA and state which ones are specific for human DNA.

describe atleast two reasons why a perpetual inventory system might be considered preferable to a periodic...

describe atleast two reasons why a perpetual inventory system might be considered preferable to a periodic inventory system. explain in detail

Do car dealerships use a perpedual or periodic inventory system. Please elaborate on the reasons why...

Do car dealerships use a perpedual or periodic inventory system. Please elaborate on the reasons why one is more preferable over the other.

The company's merchandise inventory turnover for 200B was

The following information pertains to Batalla Company for 200B: Inventory at December 31, 200B 16,000 Purchases of merchandise, all on credit 72,000 Cost of goods sold 80,000 The company's merchandise inventory turnover for 200B was a. 4.0 months b. 10.0 times c. 4.0 times d. 3.60 months

-if a company's selling price for inventory falls below the cost of the inventory, the value...

-if a company's selling price for inventory falls below the cost of the inventory, the value of the inventory asset is adjusted. TRUE-FALSE -Units of production is the most accurate depreciation method. TRUE - FALSE -Double declining balance depreciation calculates depreciation expense by multiplying the cost less residual value by a depreciation rate. TRUE-FALSE -Warranty costs are depreciated over the life of the warranty. TRUE - False -Warranties offered by a company on its products are liabilities. TRUE - False...

Question