Stock Verification: Definition and Explanation

A company’s stocks represent cash. They should be stored, checked, and valued periodically, especially at the end of a given period.

The value of a stock is usually much greater than the cash held at a particular time.

It is, therefore, necessary to verify stock value from time to time to ensure that the materials purchased and stored are, in fact, in the storehouse and their quality and quantity have not deteriorated during the storage process.

There is, for this reason, a need for physical verification of socks.

Purposes of Stock Verification

Physical stock verification is the process used to ascertain the correctness of goods (e.g., in terms of quality and quantity) in the store on a given date.

In physical stock verification, emphasis is laid on the verification of quantity by counting or weighing (or adopting any other suitable means).

The following are the main purposes of physical verification of materials lying in the stores:

  • To examine the correctness of the stock records
  • To examine the correctness of the values entered in the stock record
  • To detect discrepancies, if any
  • To find weaknesses, if any, and to suggest improvements
  • To safeguard against staff abuses

Frequently Asked Questions

What are some common mistakes made during stock verification?

Verifying specific batches or items requires a great deal of effort and time, but it is often not done as thoroughly as planned. Companies should therefore consider how valuable such detailed verification is compared to other activities for example, verifying all stock instead of just specific batches.

What are some of the disadvantages of stock verification?

Verifying stock can be time-consuming since each item must be checked in detail. Sometimes the benefits may not justify this effort, depending on how much time can be devoted to carrying out a stock verification, for example, an extra couple of hours a week.

What are some common mistakes made during a stock take?

Mistakes often occur when companies go from one system to another or forget that stock is not static. For instance, if the storage location for a product changes between two systems, it can lead to an inaccurate count and result in additional costs to the company.

What does a stock verification consist of?

A stock verification consists of a check to determine that the quantity and quality of items on hand corresponds with what is recorded in the accounting system. The method used for the stock verification will depend on the type of item being verified, for example, a physical count or weighing. A sample will need to be taken if there are products which will not be available for a certain period of time, such as seasonal items.

Why carry out a stock take?

Stock takes are carried out to update stock records and update the actual quantity on site in accordance with the updated record. The frequency of stock takes will depend on the accuracy of the record and how quickly it is updated. If the record is not updated quickly, it will become increasingly less accurate.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

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