What is it called counting the goods on hand at the end of the accounting period and determining the cost of these goods by the accounting records?
I know the answer to this question because I am an auditor and I
have audited inventories all over the world. I am a certified
Internal Auditor.
There are two steps, given the wording of your question.
Step 1: 'Taking inventory" or "A physical count of inventory" or
"stock taking". There is no one universal English phrase. Name it
as you like it. Step 1 consists of assembling a group of people,
giving them written instructions and probably using paper
pre-printed cards with labeled spaces for data (called a "count
ticket"). Give the people verbal instructions as well. Send them
out into the warehouse or factory and have them count the goods on
hand. More detail: You need to record at least 2 things: the name
or stock number of the item being counted, and the quantity that is
physically sitting there on the floor or in the rack. The goods
need to be labeled with a stock number, or the counters (people)
need a way to determine what they are looking at and look up a
stock number. So after you determine what you are looking at, you
write the stock number on the card. Then you COUNT how many units
are on hand. It is not rocket science. It is just common sense. You
need to record what is there and how many units are there. You will
have a "unit of measure" for each item: piece, unit, pair,
assembly, kit, feet, pounds, yards, etc. You need to have a unit of
measure already established for each item. It is best to have the
inventory labeled with a paper (or something) label, that shows the
description, stock numner and unit of measure. If you get the unit
of measure wrong, your count will be wrong, so unit of measure is
important. Some things are counted by weighing them, and the unit
of measure is pounds or kilograms. Once you get everything counted,
you collect all the count ticket cards (which each have a serial
number, so you can place them in physical order and see if you got
back all the tickets, which is important). You will probably have a
computer program where you can key each count ticket, and the
software will sort all the counts into order by stock number, and
add up a total where there is more than one ticket for a given
stock number. So you get a report or computer file of what is on
hand and how many.
Stpe 2: Costing the inventory. Once you have the number of units
on hand for each item (as above), then you need to applpy a "unit
cost' to each stock number, multiply the quantity on hand times the
unit cost, and get total $ on hand for each item, then add up all
of the $$ on hand and get a total inventory $ on hand, which you
enter into your inventory account on your accounting general
ledger. There are various methods to establish a unit cost for an
item. I manufacturing, you will already have some sort of
"inventory costing method" where you set up a unit cost for each
ingredient in the product, each labor operation required to
fabricate the unit, the amount of labor (in minutes or seconds or
hours) and a price for each unit of labor based on the wage rate,
plus employee benefits costs, so you get a cost per hour of labor.
Then you need to calculate a rate of "overhead $ per labor hour (or
machine hour)", which is an allocation of overhead costs to each
labor hour (or machine hour). You take all your overhead expenses
for the year, and add them up (property tax, maintenance, cost of
the building, cost of machinery, indriect labor, etcetea) and
divide the total $ by a budgted number of labor hours you expect to
have the workers work for the entire year. This gets you an
"overhead rate of $ per labor hour". This becomes part of your unit
cost. The unit cost consists of material, labor and overhead. // In
retail or wholesale, your unit cost is the price you pay the
supplier to but the merchandise, so it is much easier to determine
a unit cost in retail or wholesale than in manufacturing. Email me
at david49586@yahoo.com and I can give you more detail.