Bafu Ltd., a private limited company, manufactures a wide range of bathroom fittings. These fittings are made from steel components which are chromed in small vats. The steel components are sourced from outside suppliers. The year end stock mainly consists of these steel components and finished items. As at 31 October 2004, the total stock was valued at Sh. 6,048,000 out of total assets of Sh. 19,200,000. This stock figure was obtained by a physical count as at 31 October 2004, and valuation by reference to purchase invoices and manufacturing cost estimates. Required: With reference to each of the matters listed below, state the work you would do to conclude whether the amount attributed to stock is fairly stated. Identification of stock items

Identification of stock items
• Comparing stock items in the stock sheets with the items of stock in the shelves/store.
• Verifying that stock items‘ description in the stock sheet match the actual stock item (as per given code) in the store.
• Ensure there is a clear distinction between finished units and steel components and that work-in-progress, if any is clearly identified.
• Verify that stock-in-transit is not included in stock count since it‘s not present at the store. This is recorded in purchases journal.

Share through

Leave a Reply

Your email address will not be published. Required fields are marked *