Being a Cost Analyst of an Automobile Company, you have suggested adopting a perpetual inventory system for inventory maintenance. On what factors a perpetual inventory system would be suggested?
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Under this system, a complete and continuous record of movement of each inventory item is maintained. Perpetual records are useful in preparing monthly quarterly or other financial statement. Record used is normally a “store ledger card” specifying quantity wise receipt, issue and balance together with values in chronological sequence. Generally this is accomplished by connecting the inventory system with order entry and in retail the point of sale system. In this case, book inventory would be exactly the same as, or almost the same, as the real inventory.
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Under this system, a complete and continuous record of movement of each inventory item is maintained. Perpetual records are useful in preparing monthly quarterly or other financial statement. Record used is normally a “store ledger card” specifying quantity wise receipt, issue and balance together with values in chronological sequence. Generally this is accomplished by connecting the inventory system with order entry and in retail the point of sale system. In this case, book inventory would be exactly the same as, or almost the same, as the real inventory.
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a system of records maintains by controlling department which reflect the physical movement of stocks and their current balances". Bin card and store accuracy, physical verification may also be made which must have to agree with the balances of Bin Card and store ledger. A proper system of material control will save the organization from losses like wastage and obsolescence. This method is used in large organizations in which it is important to control the amount of capital tied up in the running of the business. It also provides a means of checking pilferage.
Regards
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