Reporting and analysing inventory at North veterinary medicine limited company

TABLE OF CONTENT Chapter LITTERRATURE REVIEW ON REPORTING AND ANALYSING INVENTORY 1.1 Definition and classification of inventory 1.1.1 Definition of inventory 1.1.2 Classification of inventory 1.2 Determining inventory quantities 1.2.1 Taking a physical inventory 1.2.2 Determining ownership of goods 1.3 Inventory costing 1.3.1 Purchases of merchandise 1.3.2 Sales of merchandise .6 1.4 Reporting inventory 11 1.4.1 Income Statement effects 11 1.4.2 Balance Sheet effects 12 1.4.3 Tax effects 12 1.5 Analysis of inventory 13 1.5.1 Inventory turnover ratio 13 1.5.2 LIFO reserve .13 Chapter 15 REPORTING AND ANALYSING INVENTORY AT NORTH VETERINARY MEDICINE LIMITED COMPANY .15 2.1 Generals of North veterinary medicine limited company 15 2.1.1 Formation and development .15 2.1.2 Field of business 16 2.1.3 Manufactoring process .16 2.1.4 Organisation structure 18 2.1.5 Businness performance .19 2.2 Reporting and analysing inventory at the company 20 2.2.1 Documents circulation 20 2.2.2 Inventory costing 21 2.2.3 Reporting inventory .23 2.2.4 Analysis of inventory 30 2.3 Findings 30 2.3.1 Strengths 30 2.3.2 Weaknesses 31 Chapter 32 RECOMMENDATIONS TO IMPROVE REPORTING AND ANALYSING INVENTORY AT NORTH VETERINARY MEDICINE LIMITED COMPANY 32 3.1 Development plan of North veterinary medicine limited company 32 3.1.1 Business development plan 33 3.1.2 Objectives of developing the activity of reporting and analysing inventory34 3.2 Implications proposed to the company to improve reporting and analysing inventory .35 3.2.1 Inventory check book 35 3.2.2 Provision for devaluation of stocks 37 3.2.3 Establish the account “Goods in transit” 37 3.2.4 Apply Accounting softwares 38 3.2.5 Improve documents movement process 38 TABLE OF FIGURE Table 1.1: Example of inventory costing at Houston Electronics Table 1.2: FIFO cost of goods available for sale at Houston Electronics Table 1.3: FIFO ending inventory at Houston Electronics Table 1.4: FIFO cost of goods sold at Houston Electronics .7 Table 1.5: LIFO cost of goods available for sale at Houston Electronics Table 1.6: LIFO ending inventory at Houston Electronics Table 1.7: LIFO cost of goods sold at Houston Electronics .9 Table 1.8: Average cost of goods available for sale at Houston Electronics .9 Table 1.9: Average ending inventory at Houston Electronics 10 Table 1.10: Average cost of goods sold at Houston Electronics .10 Table 1.11: Comparison of three assumed cost methods in income statement at Houston Electronics 11 Diagram 2.1: Drugs manufacturing process at North veterinary medicine Co.,Ltd 16 Diagram 2.2: Organisational structure of North veterinary medicine Co.,Ltd 17 Table 2.1: Income statement of the year end 2011 and 2012 of North veterinary medicine Co.,Ltd 18 Diagram 2.3: Documents circulation process at North veterinary medicine Co.,Ltd .19 Table 2.2: Account Cost of goods sold at North veterinary medicine Co.,Ltd 21 Table 2.3: Stock card of the inventory Sulpha dimidin at North veterinary medicine Co.,Ltd 22 Table 2.4: Inwards notes of 30th November 2012 at North veterinary medicine Co.,Ltd 23 Table 2.5: Subcidiary ledger of the month of November 2012 at North veterinary medicine Co.,Ltd 24 Table 2.6: Stock movement summary of the month of November 2012 at North veterinary medicine Co.,Ltd 25 Table 2.7: Liquidation record of the year end 2012 at North veterinary medicine Co.,Ltd.28 Table2.8: Inventory turnover ratio and Days in inventory of 2011-2013 period at North veterinary medicine Co.,Ltd .29 Table 3.1 Stock movement target of North veterinary medicine Co.,Ltd in 2015 .32 Table 3.2: Financial plan of North veterinary medicine Co.,Ltd in 2015 33 Table 3.3: Purposed Inventory check book at North veterinary medicine Co.,Ltd 35 Figure 3.1: Quickuse accounting software 37 Table 3.4 Proposed documents recept note at North veterinary medicine Co.,Ltd 38 ~1~ INTRODUCTION One of major goals in managing a business is to store the least amount of inventory while maintaining specific operating requirements Ideally, the inventory control allows the business to supply needs in regards to production or to the customer at the precise moment needed, at the minimal price Successful inventory control keeps waste and surplus at a minimum and efficiently handles storage, production and distribution of inventory That is the reason why, in order for business and supply chains to run effectively and efficiently they must meet all the listed requirements for effective inventory management Some of the main concerns are the level of customer service and the cost of ordering, storing, and carrying inventory Therefore, inventory must be managed wisely Reporting and analysing inventory plays a vital role in managing a company's inventory Basically, its function is to monitor the net worth of goods and maintain accurate records at all times In addition, this process helps the company to determine its profitability and ensure accurate financial statements through specific tasks including supervising inventory counts, inputting inventory data, evaluating reports, checking discrepancies and presenting findings As a manufacturer and retailer, the operation of North veterinary medicine limited company need to be precise and effectiveness in inventory management With expectation to study this subject, I have spent weeks working as an intern in Accounting department of North veterinary medicine limited company Consequently, I chose the topic: ”Reporting and analysing inventory at North veterinary medicine limited company” for my internship report The report is divided into three main chapters:  Chapter 1: Literature review on Reporting and analysing inventory  Chapter 2: Reporting and analysing inventory at North veterinary medicine limited company  Chapter 3: Recommendations to improve reporting and analysing inventory at North veterinary medicine limited company I would like to thank the company's director, the staff and my tutor, Mrs Le Thi Phuong Dung for helping me to finish this report ~2~ Chapter LITTERRATURE REVIEW ON REPORTING AND ANALYSING INVENTORY 1.1 Definition and classification of inventory 1.1.1 Definition of inventory “Inventory is an asset that is owned by a business that has the express purpose of being sold to a customer This includes items sold to end customers or distributors It includes raw materials, work in process, and finished goods The management of inventory is a key concern of all businesses If a company's inventory level is too low, it risks delays in fulfilling it's customers orders If the inventory is too high, it is tying up dollars that can be better used in other areas It also risks obsolescence and spoilage Successful businesses keep their inventory turns high, but also keep their service level at or above the industry standard.” (Source: InventoryDefinition.com) “The value of materials and goods held by an organisation to support production (raw materials, subassemblies, work in process), support activities (repair, maintenance, consumables), or for sale or customer service (merchandise, finished goods, spare parts) Inventory is often the largest item in the current assets category, and must be accurately counted and valued at the end of each accounting period to determine a company's profit or loss Organizations whose inventory items have a large unit cost generally keep a day to day record of changes in inventory (called perpetual inventory method) to ensure accurate and on-going control Organizations with inventory items of small unit cost generally update their inventory records at the end of an accounting period or when financial statements are prepared (called periodic inventory method) GAAP require that inventory should be valued on the basis of either its cost price or its current market price whichever is lower of ~3~ the two to prevent overstating of assets and earning due to sharp increase in the inventory's value in inflationary periods The optimum level of inventory for an organization is determined by inventory analysis Called also stock in trade, or just stock.” (Source: BusinessDictionary.com) 1.1.2 Classification of inventory How a company classifies its inventory depends on whether the firm is a merchandiser or a manufacturer In a merchandiser, inventory consists of many different items but with two common characterisitics:  Owned by the company  In form ready for sale to customers Thus, merchandisers need only one inventory classification – merchandise inventory – to describe the many different items that make up the total inventory In a manufacturing company, some inventory may not yet be ready for sale As a result, manufacturers classify inventory into three main categories:  Finished goods inventory: manufactured items that are completed and ready for sale  Work in process: the portion of manufactured inventory that has begun the production process but is not yet complete  Raw materials: the basic goods that will be used in production but have not yet been placed into production 1.2 Determining inventory quantities No matter which inventory system they are using, all companies need to determine inventory quantities at the end of the accounting period The process of determining inventory quantities involves two steps 1.2.1 Taking a physical inventory This process involves activities such as actually counting, weighing, measuring each kind of inventory on hand In many companies, taking an inventory is a formidable task An inventory count is generally more accurate when a limited ~4~ number of goods are being sold or received during the counting Consequently, companies often take inventory when the business is closed or slow 1.2.2 Determining ownership of goods One challenge in determining inventory quantities is making sure the company owns the inventory To determine ownership of goods, two special kinds of goods must be considered:  Goods in transit: goods purchased which have not yet been received or goods sold which have not yet been delivered  Consigned goods: goods hold of other parties to sale without taking ownership 1.3 Inventory costing The basic requirement for counting an item in inventory is economic control rather than physical possession Therefore, when a company purchases inventory, the item is included in the purchaser’s inventory even if the purchaser does not have physical possession of those items Inventory is usually classified in its own category as an asset on the balance sheet, following receivables It is important to note that the balance sheet’s inventory account should also reflect costs directly or indirectly incurred in making an item ready for sale, including the purchase price of the item as well as the freight, receiving, unpacking, inspecting, storage, maintenance, insurance, taxes, and other costs associated with it 1.3.1 Purchases of merchandise Companies normally record purchases when they receive the goods from the seller Every purchase should be supported by business documents that provide written evidence of the transaction – a purchase invoice – which indicates the total purchase price and other relevant information However, the purchaser does not prepare a separate purchase invoice Instead, the purchaser uses a copy of the sales invoice sent by the seller ~5~ Under the perpetual inventory system, companies record purchases of merchandise in the Inventory account  Freight costs The transporting costs of the goods to the buyer’s place of business could be charged to either the seller or the buyer If freight costs incurred by the buyer, they are part of the cost of purchasing merchandise and are recorded directly to the Inventory account In contrast, freight costs incurred by the seller on outgoing merchandise are an operating expense to the seller In this case, the seller usually establish a higher invoice price for the goods, to cover the expense of shipping  Purchase returns and allowances A purchaser may be dissatisfied with the merchandise received because the goods are damaged or defective, or inferior quality, or not meet the purchaser’s specifications In such cases, the purchaser may return the goods to the sellerfor credit or cash refund This is known as a Purchase return Alternatively, the purchaser may choose to keep the merchandise if the seller is willing to grant a reduction of the purchase price This is known as a Purchase allowance  Purchase discounts The credit terms of a purchase on account may permit the buyer to claim a cash discount for prompt payment This is called a Purchase discount, which offers advantages to both parties: the buyer saves money and the seller is able to shorten the operating cycle by converting accounts receivable into cash earlier 1.3.2 Sales of merchandise Inventory is accounted for at cost Cost includes all expenditures necessary to acquire goods and place them in condition ready for sale After having determined the quantity of inventory, company applies unit costs to the quantity to determine the total cost of inventory and of cost of good sold According to different times and prices of purchase and sale, we have alternative inventory costing methods ~6~ a Specific identification Specific identification requires the company to keep records of the original cost of each individual inventory item This method used to be only possible when company sold a limited variety of high-unit-cost items that could be identified clearly from the time of purchase through the time of sale Today, with bar coding, electronic product codes, radio frequency identification, it is possible to nearly any type of product However, this practice is still relatively rare b Cost flow assumptions These methods differ from specific identification in that they assume flows of costs that may be unrelated to the actual physical flow of goods To demonstrate these methods, we use a periodic inventory system Firstly, we know the cost of goods sold formula in periodic inventory system as: (Beginning inventory + Purchases) – Ending inventory = Cost of goods sold Table 1.1: Example of inventory costing at Houston Electronics Houston Electronics Date Jan Apr 15 Aug 24 Nov 27 Unit:USD Explanation Units Unit cost Total cost Beginning inventory 100 $10 $1,000 Purchase 200 11 2,200 Purchase 300 12 3,600 Purchase 400 13 5,200 Total units available for sale 1,000 $12,000 Units in ending inventory 450 Units sold 550 (Source: Kimmel ; Weygandt ; Kieso, 2010) We will in turn apply three assumed cost flow methods:  First-In, First-Out (FIFO): The FIFO method assumes that the earliest goods purchased are the first to be sold FIFO often parallels the actual physical flow of merchandise because it generally is good business practice to sell the oldest units first Under this method, the costs of the earliest goods purchased are the first to be recognised in determining cost of goods sold, regardless which units were actually sold ~7~ Table 1.2: FIFO cost of goods available for sale at Houston Electronics Cost of goods available for sale Date Jan Apr 15 Aug 24 Nov 27 Unit:USD Explanation Units Unit cost Total cost Beginning inventory 100 $10 $1,000 Purchase 200 11 2,200 Purchase 300 12 3,600 Purchase 400 13 5,200 Total 1,000 $12,000 (Source: Kimmel ; Weygandt ; Kieso, 2010) Table 1.3: FIFO ending inventory at Houston Electronics Ending inventory Date Nov 27 Aug 24 Total Unit:USD Units Unit cost Total cost 400 $13 $5,200 50 12 600 450 $5,800 (Source: Kimmel ; Weygandt ; Kieso, 2010) Table 1.4: FIFO cost of goods sold at Houston Electronics Cost of goods sold Unit:USD Cost of goods available for sale $12,000 Less: Ending inventory 5,800 Cost of goods sold $6,200 (Source: Kimmel ; Weygandt ; Kieso, 2010) Under FIFO, since it assumed that the first purchase were the first sell, ending inventory is based on the prices of the most recent units purchased Therefore, company determines the cost of ending inventory by taking the unit cost of the most recent purchase and working backward untill all units of inventory have been costed  Last-In, First-Out (LIFO): ~ 25 ~ 50 51 52 53 54 55 56 57 58 59 100gr … Liquid drugs N – Tikana 5ml Anagin C 10ml Gentylosin N – Enxin 100ml Neocin 10ml Ticol 20ml Dolin LA 20ml Colison 20ml N – Fluquin 10ml N – Coli – Prim 10ml … … … … … Bottle 1.200 0 20.000 24.000.000 20.000 24.000.000 0 Bottle 1.600 5.632 9.011.200 10.000 16.000.000 15.632 25.011.200 0 Bottle 1.600 3.341 5.345.600 20.000 32.000.000 23.341 37.345.600 0 Bottle 9.300 998 9.281.400 2.000 18.600.000 2.998 27.881.400 Bottle Bottle 800 4.800 1.350 1.533 1.080.000 7.358.400 20.000 10.000 16.000.000 48.000.000 21.350 11.533 17.080.000 55.358.400 0 0 Bottle 3.500 48 168.000 0 48 168.000 0 Bottle 2.800 97 271.600 0 97 271.600 0 Bottle 1.400 3.800 5.320.000 10.000 14.000.000 13.800 19.320.000 0 Bottle 750 9.010 6.757.500 0 9.010 6.757.500 0 Bookkeeper (Signature) … 1.182.897.950 … 1.463.618.800 Chief accountant (Signature) … 1.772.624.000 Director (Signature, stamp) … 873.892.750 ~ 26 ~ (Source: North veterinary medicine Co.,Ltd documents) ~ 27 ~ Table 2.7: Liquidation record of the year end 2012 at North veterinary medicine Co.,Ltd 31st November 2012 North veterinary medicine Co.,Ltd LIQUIDATION RECORD According to the production and sales of the year end 2011, North veterinary medicine Co., Ltd has done the stock taking activity and has recognised a quantity of inventory purchased for quite long time This meeting takes place with purpose of making liquidation of this quantity of inventory  Attendees Dương Thị Thanh Hà – Chief accountant Phạm Thị Hoa – Factory manager Phạm Thị Hằng – Storekeeper  Liquidation inventory Sulph diazin: 25kg x 160,000 = 4,000,000 VND Thiaphenicol: 25kg x 780,900 = 19,522,500 VND Cremophos: 60kg x 205,000 = 12,300,000 VND Total amount: 35,822,500 VND Chief accountant Storekeeper Factory manager Director (Signature) (Signature) (Signature) (Signature, stamp) (Source: North veterinary medicine Co.,Ltd documents) 2.2.4 Analysis of inventory ~ 28 ~  Inventory turnover ratio Table2.8: Inventory turnover ratio and Days in inventory of 2011-2013 period at North veterinary medicine Co.,Ltd Unit: VND 2011 Inventory turnover ratio = = 2,8 Days in inventory = 2012 2013 3,5 4,0 = 130 104 98 (Source: North veterinary medicine Co.,Ltd documents) The Inventory turnover ratio of North veterinary medicine limited company is low – Days in inventory is high, which means the company has maximal funds tied up in inventory, the company keeps a large quantity of inventory This provides advantage in catching up business opportunities, but in the mean time increases inventory costs The indicator of Inventory turnover ratio got higher over time, which means Days in inventory decreases, is a positive signal to the level of inventory maintained of the company  LIFO reserve North veterinary medicine limited company uses FIFO assumed cost flow method, that is why it does not need to calculate the indicator LIFO reserve 2.3 Findings 2.3.1 Strengths Generally, accounting management of North veterinary medicine limited company works effectively The accounting and finance department is centralisingly, orderly structured, which adapts to the company’s operation Accountants are educated, active and experient Accounting documents and circulation process are applied rightly and approppriately The activity of reporting and analysing inventory have advantages as well ~ 29 ~  Stock purchase, sale and management: The company is doing well in accounting for inventory, from purchase planning to sales, which ensure the quantity and quality of merchandise products  The documents circulation process is simple, easy to follow, to inspect, to compare and calculate, which is approppriate to the products’ characteristics  Inventory is often and continuously checked, inspected as requirements of the company’s business field  The company uses real price formula for inventory, and FIFO assumed cost flow method, which provide the in-time data to the company to assess inventory costs and for farther management activites This method also provides a closer price with the market price, which makes accounting data more realistic meaning 2.3.2 Weaknesses Along with advantages, the activity of reporting and analysing inventory exists some weaknesses  The circulation of documents among departments occurs not often enough, which causes data sometime be missed and hard to follow Otherwise, the lack of Acceptance report could cause ignorance of the receptant in case of missing documents  The company scope is small, so are employees  The provision for devaluation of stocks has not been performed When the market price fluctuates, inventory costs would be influenced  Inventory report is an important activity, though which is not very seriously considered  Accountants duties are not clearly classified, each has big quantity of tasks to so performances would be down Chapter ~ 30 ~ RECOMMENDATIONS TO IMPROVE REPORTING AND ANALYSING INVENTORY AT NORTH VETERINARY MEDICINE LIMITED COMPANY 3.1 Development plan of North veterinary medicine limited company As a developing country, with over 70% of the population who work in agriculture and breeding, Vietnamese market provides many opportunities to the veterinary medicine field North veterinary medicine limited company is operating well, but it is necessary for the company to take opportunities and plan for future development At the national level, the awareness that enterprises are central to the economic and social development has been confirmed, from that perception, the government will complete and promulgate policies to encourage economic investment enterprises business in the near future The positive reputation of North veterinary medicine Co.,Ltd with the commercial sector, suppliers, business enterprises and industries will create the basic premise for the company to take advantage of business opportunities to make a profit The determination of the collective efforts of the Director and all employees, along with the quality of the human resources of the company in implementing better business philosophy, for the benefit of all shareholders will be the deciding factor to business results of the company With good business conditions, the financial situation of a healthy company with a management process: accurate – promptly - intelligible - honest and legal, not only in the stages of the production process but also in the business of information disclosure has and will create confidence for our partners, shareholders of the company and the agency relationship with the company The company’s operation structure and management, and the qualified personel who properly invested to update their knowledge, be active, creative, sensitive to adapt to the situation, to overcome difficulties to capture business opportunities 3.1.1 Business development plan ~ 31 ~ North veterinary medicine limited company’s business target in the next financial year is to maintain and increase income before taxes to 50% compared to the recent financial year Table 3.1 Stock movement target of North veterinary medicine Co.,Ltd in 2015 Inventory name Powder drugs N– Unit Pack Opening Inward Outward Closing stock stock stock stock 50.304.000 100.217.60 150.641.60 200.555.200 Coccicid N– Pack 120.179.000 75.000.000 0 80.945.000 114.234.000 Doxycin N– Pack 50.050.000 25.500.000 30.525.300 45.024.700 drugs Anagin C Bottle Gentylosin Bottle 35 011.200 29.345.600 72.000.000 112.000.000 96.000.000 100.375.50 11.011.200 40.970.100 24.700.000 28.960.400 6.000.000 Oxycol … Liquid Neocin … Bottle 10.260.400 (Source: North veterinary medicine Co.,Ltd documents) Table 3.2: Financial plan of North veterinary medicine Co.,Ltd in 2015 Sales revenue Sales revenue Less: Sales returns and allowances Sales discounts Net sales 5.230.000.000 5.230.000.000 ~ 32 ~ Cost of goods sold Gross profit Operating expenses Income from operations Other revenues and gains Interest revenue Other expenses and losses Interest expense Income before taxes Income tax expense Net income 1.924.000.000 3.306.000.000 1.783.000.000 1.523.000.000 1.822.000.000 993.000.000 2.352.000.000 588.000.000 1.764.000.000 (Source: North veterinary medicine Co.,Ltd documents) 3.1.2 Objectives of developing the activity of reporting and analysing inventory  To better accounting activity is to well manage inventory, maintaining an approppriate quantity of inventory to ensure the company’s continuous operation process, avoiding interruption or overcost  To well manage inventory is to better reporting and analysing inventory, providing adequate, righteous, authentic and in-time data in reporting, measuring and inspecting  A good inventory management facilitates the decision making process of managers on short term, long term business plan, therefore makes profit to the company  The business goal of every company is profit maximisation To achieve this goal, essentially the company needs to minimise expenses Improving inventory accounting to well manage costs serves this purpose as well 3.2 Implications proposed to the company to improve reporting and analysing inventory Any change or improvement in reporting and analysing inventory, as well as any accounting activity must observe accounting assumptions (economic entity assumption, monetary unit assumption, time period assumption) and principles (cost principle, full disclosure principle, going concern principle, matching principle, revenue recognition principle) and other rules (materiality, conservatism, reliable ~ 33 ~ and verifiable and objective, consistency, comparability) Furthermore, it is required to comply with the Accounting standards of Vietnam, the regulations issued by Ministry of Finance of methods for implementing accounting systems, documents, accounts Although each company could improve the implementation in accordance with real management situation, but the framework must respect to the regime of financial management 3.2.1 Inventory check book North veterinary medicine limited company is doing business in medicine field, supplying drugs and materials for breeding The quantity of products therefore is huge and various Recently, the company manages products through ingredients and characteristics, which could causes missing or confusing mistakes In my opinion, North veterinary medicine should establish a consistent Inventory inspection system through “Inventory check book” Inventory check book is a check list which gathers all ingredients and materials that had been and have been using in production Inventory are followed by groups, types and specifications in an tightly logical way The point is to establish a coding system which is simple, ordered, exclusive, easy to search and supplement The coding system could be established basing on characteristics such as:  Product groups quantity of each inventory (ingredients and materials)  Types quantity in each group  Specifications quantity in each type Having an Inventory check book brings advantages in inventory management to the company Firstly it helps employees to avoid mistakes, to facilitate duties concerned inventory flow system Accountants and storekeepers have a consistent foundation to write further documents such as Inventory reports or Stock movement summaries, and further professions Inventory check book coordiantes better with Accounting softwares, which provide a huge support to accounting activities of the company Therefore, the company saves time, human resource and mistake while improves the activity of accounting for inventory Table 3.3: Purposed Inventory check book at North veterinary medicine Co.,Ltd Number Check code Inventory name Unit Note ~ 34 ~ Grou p 156 Type 1561.1 1561.1.1 1561.1.2 1561.1.3 1561.2 1561.2.1 1561.2.2 1561.2.3 1561.2.4 … 158 1581.1 1581.1.1 1581.1.2 1581.1.3 Powder drugs N - Coccicid N – Coccicid 20gr N – Coccicid 100gr N – Coccicid 1kg Ampicoli – Oral Ampicoli – Oral 20gr Ampicoli – Oral 50gr Ampicoli – Oral 100gr Ampicoli – Oral 1kg … Liquid drugs Anagin C Bottl Anagin C 10ml e Bottl Anagin C 20ml e Bottl Anagin C 100ml e Bottl Pack Pack Pack Pack Pack Pack Pack Pack e … … 3.2.2 Provision for devaluation of stocks At the end of financial year, the company should establish provision for devaluation of stocks According to Circular No34/2011/TT – BTC, the provision for devaluation of stocks is recorded as operating expense of this financial year, which provides a financial supply for the company to cover expected losses, maintains the company’s capital Besides, the provision for devaluation of stocks expresses inventory values, investment values and accounts receivable values Subjects for this activity include all types of inventory: Finished goods, Work in process and Raw materials which have conditions as below:  Reliable documents which prove the inventory prices  Ownerships belongs to the company The provision for devaluation of stocks would be measured as the formula: Provision for = Real quantity of x (Real price - LCM value ~ 35 ~ devaluation level inventory of inventory of inventory)  Real price of inventory measured by formula of inventory costing as above  LCM value (low-of-cost-or-market): the method of evaluating costs when the value of inventory is lower then its costs 3.2.3 Establish the account “Goods in transit” This account is used when goods purchased which are belong to the company that have not yet been received, or goods sold that have not yet been delivered.the account Goods in transit could be determined as follow: Debit Price of goods purchased Credit Price of goods purchased have been received 3.2.4 Apply Accounting softwares Recently, North veterinary medicine limited company does accounting management manually on the computer with Microsoft Excel This method is complicated, time taking and low productive In my opinion, the company should consider to apply Accounting softwares in management with purpose of time and cost saving There are many simple and uncharged Accounting softwares such as: MISA, SMART, FAST, SQL, QUICKUSE… Each has particular advantages and is approppriate with different methods of accounting that that company are using Figure 3.1: Quickuse accounting software ~ 36 ~ (Source: alibaba.com) 3.2.5 Improve documents movement process The company should specifically stipulate time of documents delivered and recept among Accounting department and storekeeper This would help information and data flow be often and continuous The company should have sanction for late delivered and recept documents as well The movement of documents among departments should be recorded in paper with signature of the delivers and recepters By that, missing or mistaken documents would be responsible by the right person The purpose of this stipulation is to well manage documents movement and to teach employees to be more responsible to the company Table 3.4 Proposed documents recept note at North veterinary medicine Co.,Ltd North veterinary medicine Co.,Ltd DOCUMENT RECEPT NOTE Date:… Inventory name Document quantiy Document number Amount ~ 37 ~ Date:… Receipter Deliverer (Signature) (Signature) CONCLUSION With the purpose of becoming nationwide veterianry medicine company and establishing a strong system of reporting and analysing inventory, North veterinary medicine limited company has incessantly made much efforts and achieved significant results Although it remains some weaknesses in the performance of reporting and analysing inventory, it has a big potentiality to be completed in the future Thanks to the staff of Accounting and Finance department of North veterinary medicine Co.,Ltd during the time I worked as an intern here, I had the opportunity to observe and understand more about the reporting and analysing inventory process Therefore my report named ”Reporting and analysing inventory at ~ 38 ~ North veterinary medicine limited company” is completed with realistic and useful findings:  With scope of a small company, North veterinary medicine limited company is doing quite well in accounting activity, specifically in reporting and analysing inventory  Despite strengths, the company’s reporting and analysing inventory exists weaknesses in the circulation of documents and accountants’ duties arrangement  To improve the performance of reporting and analysing inventory at North veterinary medicine limited company, some recommendations I have researched and provided as added documents and accounts, documents movement process improvement, Accounting softwares appliance Despite my efforts, it is impossible to avoid some mistakes due to my limitation of time I really hope to receive suggestions and feedbacks from teachers and readers to improve my report I would like to express my gratitude to the director of North veterinary medicine limited company and the staff of Accounting and Finance department for their help and give so many thanks to my teacher, Mrs Le Thi Phuong Dung for her instruction ~ 39 ~ REFERENCE Anon., n.d 2011 business plan tsccantho.com.vn Anon., n.d inventory businessdictionary.com Anon., n.d Inventory investinganswers.com Anon., n.d Inventory Definition inventorydefinition.com North veterinary medicine, l c., 2012 Documents, s.l.: s.n Paul D Kimmel PhD, CPA; Jerry J Weygandt PhD, CPA; Donald E Kieso PhD, CPA, 2010 Accounting, tools for business decision making s.l.:John Wiley & Sons, Inc Thi Lan Anh, B., 2013 Final thesis, s.l.: s.n ... Literature review on Reporting and analysing inventory  Chapter 2: Reporting and analysing inventory at North veterinary medicine limited company  Chapter 3: Recommendations to improve reporting. .. MEDICINE LIMITED COMPANY 2.1 Generals of North veterinary medicine limited company 2.1.1 Formation and development      Company name: North veterinary medicine limited company Abbreviation: North. .. 32 RECOMMENDATIONS TO IMPROVE REPORTING AND ANALYSING INVENTORY AT NORTH VETERINARY MEDICINE LIMITED COMPANY 32 3.1 Development plan of North veterinary medicine limited company 32 3.1.1