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Physical Inventory Count

Brian Krogol
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Alright now let's discuss a couple more issues with inventory at the end of an accounting period. Let's check it out. Alright. So whether you're using a perpetual system or a periodic system, all companies are gonna have to determine inventory at the end of the period, right? They're gonna have to know how much inventory is on hand to put it on their balance sheet and report it. So what do they do? Well we're gonna have a physical count, They're literally gonna go into the warehouse and physically count the inventory and see what's there. Right? And this is the inventory account that happens at the end of the period. So they're gonna count the goods, measure goods if they have to weigh goods to see how much weight they have left of that good, whatever it might be. So in a perpetual system we're gonna see that the count should confirm our inventory balance in the accounting records, right? Because we in a perpetual system we're constantly updating inventory, we're perpetually updating it. So when we count the inventory in the warehouse it should match up with the records, right? And we could do any discrepancies, right? Maybe we count and there's something missing. Well that could be some waste that could be shoplifting. Or maybe even employees stealing from you. Right? And there's gonna be ways to deal with all of that but we don't really talk about it in this course and then a periodic inventory, the physical count is necessary in a periodic inventory system. Remember that a periodic system? They only update the inventory account at the end of the period, right? They keep track of how much they purchased. They keep track of all sorts of things like that. But then at the end of the period is they physically count the inventory and back into the cost of goods sold. Okay, So in a periodic system, this physical count is necessary. Every time you see a problem about a periodic inventory, they have to tell you the ending inventory because of this physical count. Okay, So that's the physical count right there. Why don't we pause right here and then we'll talk about the next issue related to the end of end of period inventory. Alright, let's check that out in the next video.