Month end procedures for reconciliation should go something like this…

1. Run Prior Period Inventory Report for end of previous period. Verify that this is very close to the Beginning Inventory amount you have recorded for the prior accounting period. If it is not close, then find out why not and make appropriate adjustments to Inventory or to the GL.

2. Run Prior Period Inventory Report for end of current accounting period.

3. Run for current accounting period. Add up all Purchases accounts that should apply to Inventory (Steel, Freight In, Outside Processing) Add in any Accrued Purchases (the material or service has been received, but the bill has not been received) Verify that the Receiving History reflects a dollar amount for the current period that is very close to the Steel Purchases plus the Accrued Steel Purchases (not billed to you yet). If not, find out why not and make appropriate adjustments to the Purchases or to Receiving History and Inventory.

4. Make sure that all work orders for the current period have been complete and costed. (any jobs not finished, make a note of these!) Run the of Sales report (based on the Sales Journal) for the current period. This will show the total Cost of Sales (you may need to subtract the Freight Out , since this is usually not a cost of sales component, and is not part of the cost of inventory).

5. Then take the Beginning Inventory, Add Purchases for the current month, Subtract COS for the current month, and the result should be the Ending Inventory. This result should be close to the Prior Period Ending Inventory value for the current period. If not, then one of the components in this equation is wrong and will require further analysis.

S:\DOCUMENTATION\Flat Roll\FR Manuals\Month End Inventory Reconciliation