There are many types of inventory operations, and the Physical Count of Inventory is one of the most important types. In general, the inventory process is one of the most important operations in the financial accounting system.
Whereas, during which all assets and liabilities owned by the institution are counted, and the aim is to compare what is recorded in the accounting books with what is actually and materially present in the institution. Accordingly, the necessary corrections and adjustments are recorded, so that the account balances match what is in reality.
In the end, create an honest picture of the company’s performance and its financial statements, and in this article we will show you all the details about the Physical Count of Inventory.
What Is Physical Inventory Count?
It is the process that takes place at the end of the year in which all liabilities and assets owned by the company are counted.
This is after the trial balance is extracted, after completing all the accounting records for the fiscal year.
The objective of the Physical Count of Inventory is to compare what is recorded in the accounting books with what is physically and physically in the company.
And then the necessary adjustments are recorded. This is until there is a match between the account balances with what is in reality.
Taking a Physical Count of Inventory
Physical Count of Inventory is most likely done at the end of the fiscal year, which companies use as one of the organized methods of calculating a company’s inventory.
The company schedules this inventory at the end of the financial period that it specifies in its report.
Types of physical inventory counts
There is more than one type of Physical Count of Inventory process and each type has its own style and technique.
Below we will show you the 4 most important types of Physical Inventory Count:
1. Electronic or POS counting
It is the most modern inventory method within the Physical Count of Inventory, which uses scanners and other technologies to calculate inventory.
What distinguishes this method is that it greatly reduces counting errors, and it saves a lot of time and effort.
But on the other hand, this method requires high costs to use it, so until now there are many companies that do not apply it.
This method is a form of digital transformation in Physical Count of Inventory.
2. Cycle Count
It is also a popular Physical Count of Inventory type in which random parts of a stock are counted at different times.
This method helps reduce the time or resources used in counting, but it often does not give the company an accurate account of its inventory.
It is one of the most widely used types of Physical Count of Inventory
3. Manual inventory counting
It is a type of traditional Physical Count of Inventory in which manual recording is used based on counting and writing in paper to record inventory.
The most characteristic of this method of inventorying inventory is its low cost, but in return it is disadvantaged by the high rate of errors as well as the huge effort in writing and recording on paper.
4. Full physical inventory
It is the most accurate type of Physical Count of Inventory, in which the company relies on hiring employees specifically for the entire inventory process.
Through it, the company can obtain accurate inventory records. But one of its main drawbacks is that it consumes a lot of labor and time, as well as requires shutting down the operations of the company.
But it is the most efficient way to take inventory within Physical Count of Inventory types