Technique # 5.

Periodic/Annual Inventory Control System:

Under this system, stock-taking is undertaken at the end of the accounting year. As the stock taking
involves verifying the physical quantities of stores in hand, some firms temporarily suspend plant
operations when this is done. This is because it is rarely feasible to take stocks when production is going
on. Thus, the annual stock- taking should be organized well in advance to minimize production holds up.

The following points are to be considered while conducting periodic stock verification:

1. A person should be appointed to control the whole operation.

2. While stock verification is going on, store room should not be opened for issues and receipts.
3. All damaged, deteriorated or used items must be recorded separately.
4. The stock-taking sheets must be under the control of one individual, consecutively numbered as
issued to staff on duty as required.
5. Materials received should be listed separately but still under inspection.
6. Make each person responsible for a particular section.
7. Show the method of check i.e. count, weight, measurement on the stock sheet for each item.
8. The method of pricing should be known and if possible, it is desirable to enter all prices in terms
of units of issue on the stock sheets in advance.
9. In case of decentralised store systems, the materials in transit at the date of stock-taking must
be taken into account.

Limitations:

Following are the main limitations of this system:

1. It takes more time to verify the stock.

2. Under this system the factory has to be closed during the period of stock verification which
results in the loss of production time.
3. Sometimes a complete check on materials may not be exercised often those materials which are
not used go unnoticed.