This page is designed to educate the UR Community about proper inventory controls and physical inventory to ledger account reconciliation methods.
Inventory best practices that you should follow:
A clearly defined objective for conducting a physical inventory for your department must be established. The purpose of the inventory is to adjust your ledger account to reflect the balance of the physical inventory count completed and extended pricing and to reconcile the variances.
Proper sales and receiving cut offs are required to ensure that the accounting records supporting transactions are consistent with the physical goods being counted. For example:
Items in inventory must be salable or usable. Damaged goods and items with zero value are excluded. Slow moving items should be valued at their market value if it is less than original cost.
Pricing is as important as the counting. The value of the inventory that will be reflected in the ledger is the result of actual quantities multiplied by appropriate prices. Adequate documentation supporting the pricing used should be retained with the inventory records. The inventory should be priced at the lower of the item's cost or the market value.
I. General Information
|General Ledger Number||0-XXXXX|
|Account Name||My Account|
|Explanation of Items held in inventory:|
|This and that, stuff|
II. Actual Physical Count of Inventory from extended totals
|of the inventory count/pricing sheets|
III. General Ledger Inventory
|Calendar month of ledger||Jan-01|
|Total inventory balance||7,628.10|
|Items purchased (included in physical count) but not recorded on ledger at date of inventory count||357.97|
|Withdrawals (sales) not recorded on ledger at date of inventory count||(51.52)|
|Other adjustments to inventory (i.e. obsolete items)||(150.00)|
|Adjusted Ledger Balance||7,784.55|
|Variance between physical count and adjusted ledger||(784.55)|
V. Adjusting journal entries
|To adjust the general ledger inventory amount to the actual physical count|
|To collapse subcodes for year end|
Support for the inventory counts (tags, sheets) and the inventory pricing (price lists, worksheets) should be retained in accordance with the University's record retention policy.
Your reconciliation and adjusting journal entry requests should be sent to General Accounting, c/o University Finance, Towne House Suite 260.