There are two types of stock taking methods that businesses commonly use:
1. Perpetual Stock Taking: This method involves continuously updating and monitoring the inventory levels in real-time. It employs the use of computerized systems and barcode scanning technology to track the movement of goods. With perpetual stock taking, businesses can have an accurate and up-to-date view of their inventory at any given time. This method helps businesses in maintaining optimal stock levels, minimizing stockouts, and improving overall inventory control. It also facilitates quick identification of discrepancies or inaccuracies in stock records, allowing for immediate corrective actions to be taken.
2. Periodic Stock Taking: This method involves conducting stock checks periodically, typically at regular intervals such as annually, quarterly, or monthly. It requires physically counting and inspecting all inventory items to reconcile the physical stock with the records. The periodic stock taking process involves temporarily halting operations and dedicating resources and manpower specifically for the stock count. While it is more time-consuming and labor-intensive compared to perpetual stock taking, periodic stock taking enables businesses to verify and rectify discrepancies in stock records, identify obsolete or slow-moving items, and ensure the accuracy of financial statements such as the balance sheet.
Explain two types of stock taking.
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