Do we need to do Physical Inventory Count for Consumption-based Acct?

[Former Member]

Dear Experts,

Do we need to do Physical inventory count or rather year-end inventory adjustment if we are running consumption-based accounting?

regards,

Abraham

[former_member187989]

Assumed Answered.

[JL23]

Can you explain what you mean by consumption based accounting? I heard this name only in conjunction with CO2 emissions.

In general the duty to count your inventory is not ruled by SAP, it is defined as legal requirment by your government, or as a company policy. SAP just gives you the technic that supports counting.

[Former Member]

Hi,

what I meant was "perpetual inventory system".. as compared to "periodic inventory system" which requires year-end inventory adjustment.. So, in order to get the closing inventory value, they need to do a physical inventory count.

I'm not sure of perpetual, whether it's required physical inventory count since it'll be updated the cost of goods sold each time goods issued.

regards,

Abraham

[avudaiappan_e]

Hi

***Excerpt ***

Though an inventory count should be taken once a year to measure and match inventory records, the perpetual inventory system does not depend on this count to determine cost of goods sold, but is used to verify inventory records.

Year-end inventory count that may interfere with normal business operations is not required. Rather, when a company uses the perpetual inventory system, a physical inventory count can be made routinely throughout the year to match perpetual inventory reporting records.

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Its not mandatory, but can be done for cross checking

I guess your financial expert from business can confirm from the legal point of view (requirement & frequency)

Thanks !

E.Avudaiappan

[Former Member]

Thanks Avudaiappan.. I got it.

[Former Member]

Sorry, one more question. How about the physical inventory procedures? Should it be set to continuous inventory or inventory sampling since it's just for cross-checking purpose if perpetual inventory system is used?

regards,

Abraham

[avudaiappan_e]

Hi

Sorry, I am not sure on that, I've not worked with a client having a similar business process, will update, if i get any info on this

Thanks !

E.Avudaiappan

[JL23]

The big question is why do want to do a physical inventory?

Because of legal requirement or because you think that your stock figures are not accurate anymore?

We usually do it for both reasons, it is law to do it once a year in Germany, and of course we want accurate inventory, so that the planning process can rely on, that we do not get confusing information from SAP, that we do not have to fix the proposed and confirmed quantities in a delivery ongoing etc etc.

SAP differentiates anual inventory (1x per year) from cycle counting (several times per year) in inventory management.

And using WM, you even can do the anual inventory as continoous inventory, which means you still count a material only once a year but throughout the year and not just on a certain day at the end of the year.

Inventory sampling is a statistical method, you count a few materials, and assume that the differences are the same for all other materials. This helps finance to adjust G/L and is maybe an allowed procedure in your country that saves a lot counting effort but does not support accurate stocks in logistics.