In this article we will discuss about:- 1. Reasons for Stock Discrepancies 2. Steps to Avoid Stock Discrepancies 3. Accounting Procedure.
Reasons for Stock Discrepancies:
The possible reasons for discrepancy between physical stock and stock shown in records may be due to the following:
(a) Shortage of material due to spoilage, evaporation, wastage in material handling, breakdown in handling and storing. Increase in weight due to absorption of water etc.
(b) Items of material placed in wrong location.
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(c) Pilferage and theft from stores by insiders and outsiders.
(d) Issue and receipt of stock without proper recording and maintenance of stores recording and accounting.
(e) Stock returns not recorded properly.
(f) Stock issues to production departments without proper recording in stock card and stores ledger.
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(g) Arithmetical errors in calculating the balances in bin card.
(h) Clerical errors in stores ledger.
(i) Supplier supplies a different quantity of material than is mentioned in the delivery challan.
(j) Discrepancy due to improper weighing of material.
Steps to Avoid Stock Discrepancies:
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Steps to be taken to avoid discrepancies in physical stock and stock as shown in records are as follows:
(a) Entry into the stores should be restricted only to authorized persons.
(b) Material requisition should be signed only by the authorized persons.
(c) Proper maintenance of stores records like bin card/stock card, stores ledger etc.
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(d) Regular check by independent staff to detect and correct mistakes.
(e) Issue of material only against proper requisition slip.
(f) Recording of all movements of stock.
(g) Physical verification and counting at the time of receipt and issue of material.
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(h) Use of FIFO method for stock issues for avoidance of deterioration and obsolescence.
Accounting Procedure for Material Shortages:
Action to be taken and to record the information:
(i) The units shown in the stock card and stores ledger is to be compared and further check it with the physical verification of units.
(ii) If any excess or shortfall of units is found, investigate the reasons.
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(iii) After identification of reasons for excess or shortfall of units, the following accounting entries are to be passed:
