University of Florida

Finance and Accounting

Skip to main Content   Search   Main Navigation   Quick Links   Resources   Website   Social   Address   What is this view

Main Navigation

Quick Links

Home   Directives and Procedures Inventories for Supply and Resale

Inventories for Supply and Resale

  1. Purpose of Inventories
  2. Establishing Inventories
  3. Supply Inventory Management and Control
  4. Management of Inventory Records

1. Purpose of Inventories

    1. Inventories are to be maintained at levels which will provide a service level commensurate with bonafide user need and at the lowest ultimate cost to the University. An item should be placed in stock when usage is repetitive and/or there is a net economic advantage to the University which more than offsets the cost of handling as a stores item or when the requisitioner’s service requirement cannot be met by direct shipment from the supplier.The stock selection should be regularly reviewed to assure that the pattern of use qualifies the item for continued retention. Obsolete and inactive items should be liquidated promptly to minimize losses. When an item qualifies for stocking, but its use is controlled by a single user, a commitment should be obtained that if the material becomes obsolete or its use is discontinued, any liquidation costs for remaining stock will be to the user. Every effort must be made to minimize such charges.

[ top]

2. Establishing Inventories

  1. When establishing an inventory, the following standards must be observed:
    • Establish proper internal controls in accordance with sound business practices.
    • Segregate duties so that different people are responsible for ordering inventory, distributing inventory, and paying vendors.
    • Create written procedures detailing how inventory is protected from theft, abuse or physical damage and how obsolete inventory is determined.
    • When inventory is obsolete or damaged, have someone at an upper level review the status of the inventory and authorize in writing its being disposed of and written off.
      • Create an annual year-end inventory plan stating the following information and send it to Financial Reporting each year by June 7.
      • Dates and times inventory will be taken.
      • Location(s) of inventory.
      • General Description of the inventory.
      • Whether inventory is resale or supply.
      • Estimated value.
      • Method used to value the inventory (Last In First Out, First In First Out, Weighted Average Cost, etc.)
      • Names and positions of staff counting the inventory and the names of the staff who will independently test the counts of others.
    • Take a physical inventory count and valuation on June 30 or July 1 of each year and report this to Financial Reporting. If the inventory count is taken on a day other than June 30 or July 1, then provide a reconciliation of the cost of the total inventory counted to the total inventory reported at year-end on your financial statements submitted to the Auxiliary Accountant in General Accounting.
    • The inventory should be verified by a person other than the person counting. The inventory report should be in spreadsheet form with quantities and costs for each item, extended to the right, and totaled. The names and positions of staff involved in the count, testing, pricing and extending the value of the inventory should be indicated on the spreadsheet.
    • The completed inventory is to be sent to Financial Reporting each year on July 13 in electronic form.
  2. “The primary basis of accounting for inventories is cost, which has been defined generally as the price paid or consideration given to acquire an asset. As applied to inventories, cost means in principle the sum of the applicable expenditures and charges directly or indirectly incurred in bringing an article to its existing condition and location.” –American Institute of Certified Public Accountants, Bulletin 43, Chapter 4
  3. The department must follow generally accepted accounting principles to value the inventory. The unit may not change inventory valuation procedures from one year to the next without approval from Financial Reporting.
  4. Significant differences discovered between physical inventory counts and perpetual or periodic inventory records will be investigated by supervisory personnel. Unresolved differences will be reported to the accountable officer.
  5. All departments having inventories must cooperate with the Office of Audit Compliance and Review when it reviews operating procedures.

[ top]

3. Supply Inventory Management and Control

    1. Standardization is to be encouraged on those items fulfilling a required function at the lowest cost by a continuing analysis of requisitioner needs.Stock adjustments are to have the signed approval of the accountable officer or designee who must not be the individual responsible for the inventory. Large adjustments shall be supported by an explanation.The accountable officer should delegate authority to the individual responsible for a supply inventory to place orders for stock or issue directly with designated suppliers for items under University or campus agreements.

[ top]

4. Management of Inventory Records

    1. Departmental accountable officers are responsible to assure accurate accounting for the inventory of merchandise for resale. The following items should be included in the planning and documentation of inventory records for unit operations:
    • Independence of the staff performing the physical inventory counts from the merchandise ordering, sales, and reconciliation functions,
    • Labeling of merchandise when put in stock to make later identification and valuation possible.
    • Management approval of adjustments to inventory records as a result of physical inventory counts.
    • Punctual and accurate recording of the approved adjustments in the University Accounting System using the appropriate Account Codes,
    • Reconciliation of physical inventory counts to inventory records (whether periodic or perpetual),
    • Segregation of consignment inventory from other inventory, and
    • The use of perpetual or periodic inventory systems.

[ top]

Footer

Resources

Website

Contact Us

Social links

Address

What is this view?

You are using a dynamic assistive view of the University of Florida site. It has all the same data and features of the original site but formatted just with assistive users in mind. It has links and content reorganized to aid assistive users and has controls at the bottom under assistive options that allow you to control key aspects such as font size and contrast colors etc.
This is not a separate text-only site, it's a dynamic view that uses unique technology from Usablenet to give assistive users better, more accessible access to the same content and features as all users that use the graphic view of the site.

Assistive Options

Top of page


Assistive Options

Open the original version of this page.

Usablenet Assistive is a Usablenet product. Usablenet Assistive Main Page.