Phy Inventory Checklist

A Checklist For Planning a Physical Inventory

Dear Client:

Planning a physical inventory is much like planning a fund-raising campaign. The logistics must be fully worked out in advance and every participant must be thoroughly briefed. The following checklist covers planning considerations which should be included in preparing for a physical count.

GENERAL PLANNING

Identify the company personnel responsible for the conduct of the count.
Make a preliminary tour of inventory locations.
Take steps to:

clean up the areas where inventory is located
accumulate like inventory items that are scattered about
stack, sort and clean inventory items
segregate defective and obsolete items
identify slow-moving items
identify consigned or other items on hand belonging to others
identify items that need not be counted
pre-count items (if practicable and controllable)
order necessary recording materials and equipment to take counts, such as tags, extra tape measures, more scales, etc.

Consider the need to physically count inventory being held by others
In setting a date or period for taking the inventory, consider the timing of the count in relation to the balance sheet date, the low point in inventory quantities

CUT-OFF PROCEDURES

Establish the cut-off date and time. This requires procedures designed to stop the flow of inventory items to assure that transactions are recorded in the appropriate accounting period in which they occurred.
Make plans for:

closing down production or suspending or controlling operations
segregating incoming inventory expected to be received during the count and establishing prenumbered receiving reports (or other means) to identify "pre-physical" and "post-physical" shipments of inventory.
accounting for inventory that must be shipped out during the count
controlling the movement of inventory in process
controlling intracompany shipments (to avoid double counting)
Identify and listing undelivered goods held by vendors for later delivery

Identify the forms for entering the physical inventory counts.
Make provision to control all count records (issued, returned, unused, and spoiled or voided) and to reconcile them at the end of the inventory count.
Determine that the count listing provides for identification of:

classifications of inventory (raw material, in process, finished goods)
condition (defective, obsolete, slow-moving, excess quantities)
location (building, floor, department, off premises, in transit)
ownership( inventory on hand belonging to others)

Most of the procedures to be followed during the physical inventory taking should be put into writing so as to guide all concerned.

Very truly yours,

KOLITA & COMPANY

Certified Public Accountants