In an era in which all the majority of functions in a business are practically forcing to moving in technology it can’t be more exciting for a company to acquire a new computer systems to improve all the component of the inventory controls. But with a new accounting information systems (AIS) implementation, good accounting controls should always ensure that all the necessary adjustments, controls as well the correct and necessary trainings are met to the personal using the new AIS.In manufacturing and merchandising companies with significant inventories good implementation control in the AIS are extremely necessary to secure a high level of inventory accuracy in order to present correct final statements. Companies with imprecise controls in inventory will take them to inaccurate valuation of inventory, this “not only affect assets on a balance sheet, but they also result in different cost of goods sold (COGS) reported and have implications for tax planning. (Sudha Krishnan and Ping Lin, 2012).
To get in perspective, CBU installed new computer system for tracking and calculating the inventory cost. At the end of the year during the annual physical inventory count they found that the inventory total were $3. 5 million instead of $4. 5 million reported in the financial statements. To correct the discrepancy, the accountants made an adjusting entry to correct the discrepancy.One account (Accountant A) were satisfied with the internal controls but the other (Accountant B) wasn’t, and believed they should develop a more timely and effective system controls.
Because of the lack of cycle counting method is very difficult to establish the factors of the discrepancy. There are essentially two ways to obtain an inventory, one of them is throughout documentation or data, the other one by observation, physical counting. All manufacturing and merchandising companies during their fiscal year should made at least one physical count to secure an accurate inventory.But what can help you decide which method of physical counting, how many are need during the year and when to perform, is doing exhausted analysis of how to obtain an accurate inventory the fulfill their specify needs and minimize the errors already found. It is obviously that the inventory of CBU were inaccurate so I conclude with the accounting B, they should develop and adopted new policies and procedures to avoid such problems in the future.
One policies they could probably add will be implementing the Block Cycle Counting Method. In the study realize by Edie Walters, Edie K. Schmidt and Kathryne Newton in 2006, they found that the Block method “was the easiest and most efficient…” in comparison with the other two methods. On the other hand it is very interesting the diverse opinions the accountants had.
By analyzing the perspective the Accountant A have, it’s correct to by satisfy with the final result of the financial statements reported.It’s very important for outsiders to be provided with an accurate information because the company relations could be affected by those outcomes if they are discover in subsequence years. Tom Chambers in 2003 said, “Customers, shareholders and potential investors will make decisions about companies whether they use accurate data or not. ” “Trust the Lord with all your heart, and don’t depend on your own understanding.
” Proverbs 3. 5. As accountant we need to be guide by God in order to accept different opinions and make adjustments, the key for success is always depending on Him and not in our knowledge’s.
