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Business Definition for: inventory control
Dictionary of Accounting Terms
inventory control

monitoring the supplies, raw materials, work-in-process, and finished goods by various accounting and reporting methods. Some controls are the maintenance of detailed stock records showing receipts and issuances; inventory ledger showing quantities and dollars; and written policies regarding purchasing, receiving, inspection, and handling. Periodic inventory counts should occur to verify that the inventory amounts per books physically exist. A good system of inventory control assists in reducing inventory ordering and carrying costs.

See also ABC method
Dictionary of Business Terms
inventory control

accounting system of maintaining inventories to prevent stockouts, reduce holding costs, and permit detecting theft.

Related Terms:
ABC method

inventory management method that categorizes items in terms of importance. Thus, more emphasis is placed on higher dollar value items ("A"s) than on lesser dollar value items ("B"s), while the least important items ("C"s) receive the least time and attention. Inventory should be analyzed frequently when using the ABC method.The procedure for ABC analysis follows: (1) Separate finished goods into types (chairs of different models, and so on); separate raw materials into types (screws, nuts, and so on). (2) Calculate the annual dollar usage for each type of inventory (multiply the unit cost by the expected future annual usage). (3) Rank each inventory type from highest to lowest, based on annual dollar usage. (4) Classify the inventory as A-the top 20%; B-the next 30%; and C-the last 50% of dollars usage, respectively. (5) Tag the inventory with its appropriate ABC classification and record those classifications in the item inventory master records.

Referring Terms:
physical verification
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 Copyright © 2007, 2000, 1997, 1987, by Barron's Educational Series, Inc. Reprinted by arrangement with Publisher.
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