Classwork Series and Exercises {Business Studies – JSS3}: Stock Taking

Business Studies JSS 3

Week 5

Topic: Stock Taking

Content:

1. Meaning of Stock Taking
2. Basic methods of stock taking
3. Meaning of stock control
4. Need/ reason for stock control
5. The importance of stock taking

A. Meaning of Stock Taking

Stock Taking is the physical checking/counting of goods in the store and comparing them with the book figure. It is done a daily basis, periodically, or at the end of each financial year.

After the physical counting of the items in store, stock value has to be placed on each item. The addition of all the values is called the closing stock. The closing stock at the end of a working period becomes the opening stock of the beginning of the next working period.

B. Basic methods of stock taking

• Periodic stock taking: In periodic stock taking, physical counting of all the stocks is done once at the end of a given period. It may be done at the end of every month or every year. This method of stock taking, to some extent disturbs the normal flow of activities in an organization.
• Perpetual inventory/ stock taking: In perpetual inventory, physical counting of stock is done each day and the result is checked against the book figure.

C. Importance of stock taking

Stock taking is important for the following reasons

1. Stock taking enables the company to know the quantity of a particular commodity in stock at any time.
2. Stock is part of a company’s capital. Holding too much or too little affects the financial situation of the company.
3. Regular stock taking prevents damaged stock and in some cases prevents theft and fraud in the store.
4. It makes it possible for the organization to have an organized stock list which will (a) facilitate easy stock taking (b) make reordering to to be more accurate.

Stock control: It enables a company to determine the maximum and minimum level of stock that will make the company carry out its normal productive activities.

D. The need for stock control

Stock control is necessary and important because

1. It will enable the management determine the maximum and minimum levels of stock holding
2. It forms the bedrock of revenue generation in a manufacturing organization.
3. Effective control of stock will reduce spoilage and damage of stock and prevent theft and fraud in the store.

E. Reasons for stock control

1. It will direct the attention of the purchasing department to decide on what to order, when to order it and the quantity to order
2. It will help management to check the level of stock holding and determine whether the level will guarantee normal flow of production activities.
3. It will ensure stock taking on regular and continuous basis.
4. It may also enable management identify possible traces of theft, fraud or damage.

Test and Exercise

1. ——— is the physical checking and counting of goods in the store and comparing it with the book figure (a) stock house (b) stock taking (c) stock control (d) store records
2. The closing stock at the end of a working period becomes (a)the opening stock of the beginning (b) the total profit at the closing of the stock (c) the work in progress (d) the cost of goods sold
3. ————- enables a company to determine maximum and minimum level of stock that will make the company carry out its normal productive activities (a) stock control (b) stock taking (c) stock record (d) stock card
4. The importance of stock taking include the following except (a) to prevent stock damage (b) to prevent theft and fraud in the store (c) to accurately determine the reorder level (d) to enable the company know the quantity of a particular commodity and raw materials in stock at any time
5. The two basic methods of stock taking is (a) periodic and monthly (b) weekly and perpetual (c) periodic and perpetual (d) all of the above

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