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Accountants' Guidebook
changes the reported amount of ending inventory stated in the balance sheet.
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valuation, which
translates into a misstatement of the reported profits of a business. It also
Accounting Controls
Bookkeeping Guidebook
corrected the "error." This transactional delay can cause major problems
when there is
an active cycle counting system in place.
Customer owned inventory. Customers may have some of their inventory at your
location, so you may mistakenly count it as though it is your own inventory.
Consignment inventory. You may have inventory on consignment at retailers, and forget
to count it.
Improper cutoff. Inventory may arrive at the receiving dock
during a physical count, so
you include it in the count. The trouble is, the corresponding supplier invoice may not
yet have reached the accounting department, so you have just recorded inventory for
which there is no cost.
Transfer imbalance. The inventory system may be set up to require you to reduce the
inventory quantity in one department, and separately increase the inventory quantity in
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