Following are the two methods of Stock Verification:
1. Annual Stores Verification.
2. Continuous Stores Verification.
Annual Stock Verification
Annual Stock Verification is also known as periodical stock verification. Under this method, the whole of the stock is verified (audited) at the end of a given period which, in normal circumstances, is the close of the financial year. This stock audit is also required at this time because the stock is to be included in the Balance Sheet. Usually, the stock verification is spread over a number of days, and then, the operation of the storehouse is suspended for the period in which the verification work remains in progress.
Advantages of Annual Stock Verification Method
Annual Stores (stock) verification has the following advantages:
1. It is simple.
2. It is convenient.
3. It is satisfactory.
4. The valuation for Balance Sheet is easily done.
5. No extra staff is required.
Disadvantages of Annual Stock Verification Method
But the method suffers from the following disadvantages (demerits):
- It has to be spread over to a number of days if the storehouse is of medium or large size.
- Extra staff is required to conduct and complete the verification.
- All discrepancies are defected only once leaving no room for corrections etc. during the course they are taking place.
- The preparation of final accounts etc. is usually delayed.
For a small size, this suits the most. But for a medium or large size, it usually does not suit.
Continuous Stock Verification Method
This is also known as perpetual stores verification method. This is carried on continuously throughout the year for which a verification programme is prepared at the beginning of the year. The verification is done according to the programme so chalked out.
The programme is so prepared that at least once in a year every item is verified. Care is taken to check other items, particularly those which are valuable and/or fast moving, twice or thrice or even four, five times a year. The programme so prepared is kept strictly confidential and here it is also necessary that store records are kept in detail and are complete and up to date. The failure of records in this respect is bound to fail the verification programme.
Advantages of Continuous Stock Verification Method
The following are the merits/advantages of this method:
1. No closure of the operation of the store-house is required.
2. No extra staff is required to conduct and complete the stock verification.
3. Discrepancies are promptly detected and the necessary corrective measure taken.
4. Permanent staff is entrusted the job to carry out the verification work throughout the year.
This method can be effectively and advantageously used by large scale storehouse. For a small storehouse, this method is costlier. However, a medium sized storehouse may also use this with advantage.