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Stock Control:

Definition and Explanation:

The materials purchased by a concern may be classified as stock items which are taken into store and held until required, or as direct deliveries to the point of consumption. The control of those materials which are stock items is known as stock control.

Function of Stock Control:

The function of stock control is to obtain the maximum stock turnover consistent with the maintenance of sufficient stocks to meet all requirements. Stock turnover is the ratio which the cost of the materials used per annum bears to the average stock of raw materials. Discussions with regard to the quantity of materials stocked are reached after may consideration such as:

  • The availability of capital for the provisions of stocks
  • The storage space available
  • The cost of storage
  • Risk of loss due to fall in prices, deterioration, obsolescence, theft etc.
  • Economic order quantities
  • Delivery delays

For effective control of materials, it is important to decide upon different levels of materials. These levels are maximum limit or level, minimum limit or level and re-order level or ordering point or ordering level. Maximum, minimum and re-order levels are not static. They must be varied to suit the changing circumstances. Thus, alteration will take place if the usage of certain materials is increased or decreased. If the re-order period changes, or if, in the light of a review of capital available, it is decided that the overall inventory must be increased or decreased.

Relevant Articles:

Need for Materials Cost Control
Requirements for a System of Materials Control
Stock Control
Reorder Level
Minimum Level or Minimum Limit
Maximum Level or Maximum Limit
Danger Level of Materials or Inventory
Economic Order Quantity (EOQ)

 

 

A D V E R T I S E M E N T

 

Financial Accounting Topics


  Introduction to Accounting
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  Transactions and Accounting Equation
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  Analysis of Business Transactions
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  Journal, Ledger and Trial Balance
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  Accounting for Bills of Exchange
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  Special Journals
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  Cash Book
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Bank Reconciliation Statement
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  Final Accounts
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  Work Sheet
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  Capital and Revenue Items
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  Valuation of Inventories
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  Accounts of Non-profit Making Organizations
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  Statement of Cash Flows
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  Accounting Ratios Analysis
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  Depreciation, Provisions and Reserves
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  Accounting Dictionary
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  Financial Calculators
 
 
 
Managerial Accounting Topics

  Financial Statements
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  Cost Volume Profit Relationship
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  Variable Costing System
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  Materials and Inventory Cost Control
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  Activity Based Costing System
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  Standard Costing and Variance Analysis
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  Balanced Scorecard
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  Capital Investment Analysis/Capital Budgeting
 

 

 

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