How to Calculate Inventory Accuracy

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Inventory management and inventory accounting exist in a symbiotic relationship. The former activity focuses on the physical management of inventory products in the company, while the latter is the process accountants follow to record and report inventory related transactions. One common task is inventory accuracy. This represents the difference between physical goods and the inventory items as reported by the accounting department. Companies often look at this number, as it can show how well inventory processes work.

Create an inventory report based on the information in the accounting system. List the inventory number, quantity and location for all goods stored in the company’s warehouse.

Conduct a physical count of each good listed on the inventory report.

Divide the actual inventory counted by the inventory listed on the report. The result is a percentage that indicates the accuracy of inventory transactions.

Review the percentages listed on the report. Determine which percentage is too low in terms of accuracy. For example, any item that is less than 90 percent accurate may need additional review.

Tips & Warnings

  • Inventory accuracy reports are just one process in the inventory management and inventory accounting process. Other reports may be necessary to test the validity and processes of a specific company.

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References

  • "Intermediate Accounting"; David Spiceland, et al.; 2007
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