Resources · Professional guides
Inventory control checklist
Use this at month-end or stock-count time. Adapt thresholds to your company size. This is a control aid, not an audit programme.
Why inventory controls matter
Inventory errors flow straight into cost of sales and profit. Weak counts also hide theft, waste, and cut-off mistakes. A short, repeated checklist beats a long document nobody uses.
Before the count
- Freeze or clearly mark goods movement during the count window (or record movements with count tags).
- Agree cut-off: last GRN number, last delivery note, last sales invoice included in the period.
- Segregate damaged, consignment, and customer-owned stock so they are not valued as your inventory.
- Print count sheets by location (warehouse, shop floor, quarantine) with SKU, description, unit.
- Assign two-person teams where value or risk is high; rotate counters periodically.
During the count
- Count from shelf to sheet (not sheet to shelf only) to reduce “phantom” confirmation.
- Record unit of measure carefully (pcs, kg, litres) — unit errors are common in Nepal trading firms.
- Tag counted bays; investigate double-count risk on open bins.
- Note slow-moving and obsolete lines for later NRV review (IAS 2 / relevant NFRS).
After the count — ledger match
- Compare physical quantities to perpetual (or stock) ledger balances.
- Investigate variances above an agreed threshold (quantity and value).
- Post approved adjustments with clear narration and authorisation.
- Reconcile inventory GL control account to sub-ledger / stock system total.
- Review cut-off: goods received not invoiced, goods shipped not invoiced, bill-and-hold if any.
Ongoing controls (monthly)
- Cycle-count high-value SKUs more often than annual full count.
- Review negative stock balances the same day they appear.
- Match production issues and finished goods receipts in manufacturing.
- Escalate unresolved variances to operations and finance together — not only “warehouse problem.”
Worked example: investigating a count variance
A physical count shows 1,240 units of a fast-moving SKU on the shelf, but the perpetual ledger shows 1,310 units — a shortfall of 70 units at a unit cost of Rs. 850, or Rs. 59,500. Before posting a straight write-off, the checklist should drive a specific sequence: check for unposted goods-received notes around the count date (a common cause — stock physically present but not yet logged), check for unposted sales/dispatch notes (stock gone but not yet relieved from the ledger), and check whether this SKU was double-counted or missed entirely in another bin location. Only once those three are ruled out does the residual become a genuine variance worth escalating — and even then, a shortfall this size on a single fast-moving line is exactly the kind of pattern (not a one-off) that should trigger a look at store access controls, not just a journal entry.
Where this sits in the ACCA syllabus
Inventory valuation and control ties into Management Accounting (MA) for costing methods and variance analysis, into Financial Reporting (FR) for IAS 2 / relevant NFRS inventory valuation (cost vs. NRV), and into Audit and Assurance (AA) for count attendance procedures and control evaluation — making it one of the more genuinely cross-paper topics in the syllabus.
Frequently asked
How often should cycle counts happen versus a full annual count?
High-value or fast-moving SKUs benefit from monthly or quarterly cycle counts regardless of whether a full annual count also happens — waiting a full year to discover a systemic issue on your highest-value lines is expensive, since the error compounds silently in cost of sales every month it goes uncaught.
What's the single most common inventory control failure in smaller Nepali trading firms?
Open, unrestricted store access combined with no same-day review of negative stock balances — a negative balance in the system is a clear signal something is wrong (a sale posted before the matching receipt, or a genuine shortage), and it's often left unresolved for weeks simply because nobody owns the daily check.