Inventory Control Procedures for Accounting

Written by david ingram Google
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Inventory Control Procedures for Accounting
The accounting department plays a hand in inventory control. (warehouse image by Niki from

Inventory control procedures primarily involve physical safeguards, company policies and training programs. The accounting department contributes to inventory control as well, by deploying a number of accounting procedures designed to keep tabs on inventory items. Building inventory control procedures into your accounting system in addition to instituting inventory control policies and safeguards can help reduce costs and maximise the value of your inventory.

Accounting Audits

At least three distinct records -- invoices or sales receipts, accounts payable or receivable and cash disbursement or income records -- should accompany all inventory purchases and sales. The accounting department is responsible for collecting these documents and ensuring that all corresponding inventory records match up. Accounting representatives should check all suppliers' invoices against signed bills of lading and accounts payable or cash disbursements records to ensure that there are no discrepancies. Accountants should also check all sales records against register receipts and accounts receivable records if applicable. Using accounting records, as checks and balances, can help you to spot issues early and determine their cause.

Inventory Count

Front-line employees perform physical counts of inventory items in storage and on retail store floors to ensure that all inventory is accounted for. Although the front-line employees actually check the inventory, it may be the accounting department's responsibility to provide the employees with inventory records to check off as they go. In larger organisations, front-line managers may print out inventory information on location from a central server, but even in this case it is the accounting department's responsibility to ensure that all records are accurate for the managers. In smaller companies, the person creating the inventory checklist may often be required to perform the physical check as well.


Retailers of highly valuable merchandise often create their own inventory identification system to help track individual items and increase inventory security. The accounting department may be tasked with assigning a unique ID to each incoming inventory item, logging the ID number in a database and attaching a physical tag to the item with the ID. Examples of businesses that may provide a unique ID for each inventory item include automobile dealerships and high-end jewellery stores.

Accounting Records

Inventory control procedures are designed to prevent waste, theft, spoilage and mishandling, but no inventory control system is perfect. When inventory does turn up missing, for whatever reason, the accounting department is responsible for reconciling the company's accounting records. Accountants must reclassify the value of lost inventory from an asset to an expense to ensure that end-of-year financial statements provide an accurate picture of the company's assets, income and expenses.

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