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To have an idea about the quantity and value of a business’s stock items
To help the business owners to decide whether additional stock materials are required or not
To help the accounting and auditing staff to compute the value of available stock.
COMPONENTS
Cost or value
Inventory Inventory
of the stock
items issued items received
items
Minimum Maximum
stock items stock items
ADVANTAGES
1.They help in knowing the quantity as well as the value of available stock materials.
2.Internal control in the management of inventory items can be established using stores
ledgers.
3.They facilitate calculating the cost and quantity of the actually available inventory
items during annual counts and audits.
4.The company owners become alert when the number of stock items falls below the
minimum level as per the Stores Ledgers.
DISADVANTAGES
1.The large number of columns found in the stores ledgers make the computing
process complicated.
2.There are chances of clerical errors, as too many columns have to be filled
during the updating process.
3.The records found in store ledgers are not detailed. They are mere
summarizations of the actual transactions.
MATERIAL PRICING METHODS
First in First Out Last in First Out
(FIFO) (LIFO)
Material Pricing
Methods
Nature of
business
Frequency of
Range of price
purchase of
fluctuation
materials
Length of
Durability of
inventory
stock
turnover period