Inventory roll-forwards
Anonymous
| Oct 13, 2011Just wondering how many companies roll-forward perpetual inventory as part of their inventory close process. , vs, just pulling perpetual records comparing to the GL and doing Physical counts periodically.
Topics:
Answers
Company: Privately held
The latter. We do cycle counts daily on an A, B, C schedule and reconcile to perpetual inventory and the GL.
Company: Private
I don't know how you would have any faith in your inventory numbers without full or cycle counts (unless you have very little inventory). I'm wondering if I don't understand your question, though. Are you asking about whether physical inventory is truly necessary to ensure accurate inventory records?
Company: in-between
We do periodic cycle counts of the inventory to keep the units honest for replenishment purposes and then a year end physical count for the audit that results in the final inventory journal entry ("shrink"). During month-end closing, we roll-forward the accounting inventory records then perform a comparison to the perpetual records. For our company, both systems are completely separate and do not talk to each other very well.
Because of a 3 week lag in A/P invoices being entered compared to purchases being received in the inventory system, we always have to accrue purchases in order to true up the inventory to the perpetual records.
For a retailer with large inventory, a roll-forward of book to perpetual is very important. You want to be aware of the numbers to accrue for shrinkage before having to book a huge adjustment at year-end.