During the financial year some of the trading stock you have purchased during the year, may have gone lost or stolen. A physical stock count is normally done by many businesses at month end and at year-end. A stock shortage or deficit occurs when the value of the physical stock items on hand, is less than the value of stock in the ledger or stock records. Trading stock shortage or deficit is an expense (fruitless or useless expense or cost) to the business.

Identify the stock shortages and calculate the trading stock items on hand:

For example, the Stock Control Account on the pre-adjustment trial balance shows tools trading stock as R(£) 5 500. In the Stock Item Report, 11 items (drill presses) with a Cost Price of R(£) 500 each was displayed.

 

At the end of the financial year, (on 28/29 February), a physical count of our stock items (stock-taking) was done and it was found that only 10 items (drill presses) valued a R(£) 5 000 (10 items at R(£) 500 each) was on hand in the stores.

To Adjust the Stock Items:
Click on the Input - Adjust Stock menu option or press the and keys on your keyboard. Alternatively you may press the and and keys on your keyboard. The Stock Item (Adjustments tab) screen will be displayed.


Select the Quantity and Latest Cost or the Quantity and Average Cost option (depending on whether you have selected to use Latest or Average Cost of Sales in the Setup - System Parameters - Stock Information menu option.
Select the Date on which you need to adjust the stock quantities. This would in this case be the last day of the financial year (28/29 February).
Click on the button to save your changes.
Click on the button or the Close button to close or exit this screen. You may also press the key on your keyboard to close or exit this screen.
Generate the Stock Item Listing Report to check that the adjustments and totals are reflected correctly. The Stock Item Report should reflect the correct adjusted total or R(£) 5 000 in this example.