Controls Over Inventory Count:

While stock taking you should apply following controls over inventory

1. Movements of inventory should be stopped during inventory counts.

2. Inventory counting sheets should be pre-printed with a description or item code of the goods, but the quantities per the records should not be pre-recorded.

3. Count-teams should be independent of warehouse department and should be sufficiently experienced and permanent employees of company.

4. Count-teams should consist of two members. One should count items, other should record item description and quantity.

5. Clear instructions should be given to all teams as to which area of warehouse is to be counted by which team to avoid omission or duplication of counting of items.

6. Count-sheets are signed by each staff member to determine accountability.

7. Inventory should be marked/tagged to indicate that it has been counted.

8. All inventory sheets should be prenumbered.

9. Damaged inventory should be separately identified.

Types of businesses

There are  mainly three types of businesses in accordance with ownership

1.Sole proprietorship
2.Partnership
3.Company

1.Sole proprietorship
             This is a business in which only one person runs the business. He is the only person who finance it and who is the responsible for its profit and loss. This business mainly depends upon this person.This business is also called sole ownership.


2.Partnership
        In partnership there are more than one persons who are running and financing the business. They share the profit/loss of business. Partners have unlimited liability.

3.Company
 This is large organization which is owned by minimum 2 persons in case of PVT and 50 in case of Public limited company. The owners have limited liability which is limited to the share of their investment. Company is an artificial person which have it own seal.

Cash basis vs Accrual basis of accounting

There are two methods of recording accounting transactions
1.Accrual basis
2.Cash basis

Accrual Basis
 Large businesses use accrual bases for recording transaction. In accrual basis, transaction will be recorded when it occur. e.g

(1)A person sales goods for Rs.100,000 on credit basis to Mr. Amir as on 1st January 2017
(2) He receives  cash for Rs.100,000 from Mr. Amir as on 10th January 2017

In this case the following entries will be passed
(1)
       01.01.2017                     Mr.Amir Account                   100,000               Dr.
                                                          Income Account                    100,000                 Cr.

(2)
        10.01.2017                   Cash Account                         100,000                Dr.
                                                          Mr. Amir Account                 100,000                  Cr.


You can see that the net effect of the above entry will be:

      (1) Cash account                        Dr.
                      Income Account                     Cr.



Cash Basis
 Normally small businesses use cash basis of accounting.Under this method the transaction will be recorded when cash will be paid or received.e.g Take the above example of Mr. Amir for consideration. The following entries will be passed under cash basis.

(1) No entry will be passed as on 1st January 2017 as no cash is involved.

(2)
10.01.2017                        Cash Account                        100,000    Dr
                                                      Income Account                  100,000                  Cr.