SOP No: GM-WH12

SOP Library

SOP NO: GM-WH12 (List of Exhibits/Attachments)

Mission: Technical Support Services

Area: Grains Marketing (GM)
Area: Grains Marketing (GM)

Activity: Warehousing (GM-WH)

Title: Revised SOP on Semi-Annual Physical Inventory Counting of NFA Inventory Items for Sale, By-Products, and Empty Sacks

Date Approved/Issued: 03/07/2002

Date Effective: 03/07/2002

Digest:

I. TERMS OF REFERENCE

A. Rationale

B. Objective

C. Scope

D. Basis

II. IMPLEMENTING GUIDELINES

General Policies

1. There shall be three inventory teams that will be responsible for the efficient and effective implementation of the program, namely, the: Central Office; Regional Office, and; Provincial Office Inventory Committees.

2. Physical inventory count shall be conducted semiannually specifically on March 31 and September 30 to ascertain inventory balances as of the end of March and September of each year. However, actual counting of stocks may be conducted earlier or later than these dates but not earlier than/later than seven calendar days before/seven calendar days after March 31 and September 30. Should the count be made at a date earlier or later than March 31 or September 30, the derived balances for March 31 and September 30 shall be computed, as follows:

If the count was made earlier

The derived balance shall be computed by adding the receipts to and deducting the issues from (receipts and issues transacted on the dates after the actual count up to March 31 and September 30) the actual count.

B = Actual Count + Receipts (After the count up to March 31 or September 30) -

Issues (After the count up to March 31 and September 30)

where DB = Derived Balance

If the count was made later

The derived balance shall be computed by adding the issues to and deducting the receipts from (receipts and issues transacted on the dates after March 31 or September 30 to the date of actual count) the actual count

DB = Actual Count + Issues ( After March 31 and September 30 up to the date of the actual count) - Receipts (After March 31 and September 30 up to the date of the actual count)

3. Physical inventory taking need not be conducted at year end for the year end financial statement reporting but the derived balance of the stocks as of December 31st of each year shall be computed from the physical inventory taking conducted on September 30.

4. As a general rule, a bag to bag count with 100% weighing shall be conducted during the semiannual physical inventory counting. However, volumetric count may be adopted if

the aggregate inventory level for all stocks inside one warehouse is above 5,000 bags.

Liquidation of accountability of stocks and MTS of accountable officers shall follow each time a semiannual

bag to bag

weighing has been undertaken and when there is a zero physical balance of stocks inside the warehouse . With this policy, the provision under the

SOP on Liquidation of Grains Stocks, Grains By-Products, and MTS Accountability

that accountability should be liquidated once a year is thus herein amended as “at least once a year”.

5. After the completion of the physical inventory count, three sets of reports shall be prepared as follows: (1)

Provincial Inventory Report Grains Stocks and its by-products

(Exhibit 1)

and

MTS (Exhibit 2),

(2)

Regional Inventory Report Grains Stocks and its by-products (Exhibit 3)

and

MTS (Exhibit 4)

, and

(3)

National Inventory Report

Grains Stocks and its by-products

(Exhibit 5) and

MTS (Exhibit 6)

6. The

Provincial Inventory Report Grains Stocks and its by-products

and MTS

shall be prepared by the

Provincial Inventory Committee

using the computer data base system with Wide Area Network Capability (WAN) which the Management Services Department shall provide.

7. Subsequently,

the

Regional Inventory Report Grains Stocks and its by-products

and MTS

shall be automatically generated using the computer data base system.

8. The

National Inventory Report

Grains Stocks and its by-products and MTS

shall be generated by the members of the

Central Office Inventory Committee

from their respective computers. This report is a computerized consolidation of all the Regional Inventory Reports.

9. The Central Office Inventory Committee shall submit to the Administrator the National Inventory Report generated from the consolidation of the Regional Inventory Reports done thru the computer network system.

10. The MSD shall issue a separate guidelines on the computerized operating system called the

National Semiannual Inventory Count Data Base

B. Specific Policies

1. Team Composition of Inventory Committees

The conduct of physical inventory shall be spearheaded by the Central Office Inventory Committee assisted by the inventory committees created in all the field offices:

Central Office Inventory Committee:

Chairman - Department Manager, IAS

Co-Chairman - Department Manager, DMO

Members - Department Manager, DAS

- Department Manager, TRDD

- COA Representative

Responsibilities

The Committee shall:

1) Review the Inventory Plans prepared by the different Provincial Offices as assisted by the Regional Offices.

2) Monitor the inventory taking throughout the country.

3) Resolve questions that the Regional and/or Provincial Inventory Committees may raise in the course of the inventory taking.

4) Submit to the Administrator the National Inventory Report generated from the consolidation of the Regional Inventory Reports not later than the last working day of May and November of each year.

Regional Office Inventory Committee:

Chairman - Regional Manager

Co-Chairman - Asst. Regional Manager

Members - Regional Accountant

- Regional Opns. Officer

- Regional SQAO

- WS II

Observer - COA Representative

Responsibilities

The committee shall:

1) Assist the Provincial Inventory Committees in preparing the Inventory Plans.

2) Supervise the different Provincial Office Inventory Committees in the conduct of the physical inventory count.

3) Resolve questions that the Provincial Inventory Committees may raise in the course of the inventory taking.

4) Monitor the Provincial Offices on the progress of data entry of the results of the physical inventory taking. Both the

Regional

and the Provincial Inventory Reports

should be ready for access by the Central Office Inventory Committee

not later than May 15 and November 15 of the same year the count was conducted. If these dates fall on weekends or holidays, the reports should be available to the Central Office Inventory Committee immediately the following working day.

5) Recommend appropriate actions to be undertaken on the findings and observations derived from the inventory taking.

Provincial Office Inventory Committee:

Chairman - ProvincialManager/Officer-in-Charge

Co-Chairman - Asst. Prov’l Manager/Prov’l. Opns. Officer

Members - ProvincialAccountant

Prov’l. SQAO

Warehouse Supervisor II

Observer/Witness- COA Representative

Responsibilities:

The Committee shall:

1) Prepare the Inventory Plan for the Province.

2) Conduct semiannual physical inventory count of inventory items for sale, by-products, and MTS inventories in all warehouses under the jurisdiction of the provincial office. As such, it shall be the provincial inventory committee’s responsibility to determine the appropriate method of counting to be applied - bag to bag weighing or volumetric counting.

3) Gather all reports pertaining to the preparation of the

Warehouse Semiannual Inventory Count Report-Grains Stocks and By-Products

(Exhibit 7) and

Warehouse Semiannual Inventory Count Report-MTS

(Exhibit 8)

on a per warehouse basis. These reports shall be completed not later than April 11 and October 11 of the same year the count was conducted

or on or before the 11th day following the actual count if the count was made earlier or later than March 31 or October 30.

If these dates fall on weekends or holidays, the reports shall be submitted to the Chairman of the Provincial Inventory Committee the following working day.

These reports include the following:

Inventory of Accountable Forms

(Exhibit 9)

Inventory Count Sheets - Grains Stocks and By-products

(Exhibit 10)

Inventory Count Sheets - MTS

(Exhibit 11)

Listings of Balances per Books and Computation of Derived Balance

-Grains Stocks and By-products

(Exhibit 12)

Listings of Balances per Books and Computation of Derived Balance-MTS

(Exhibit 13)

Monthly Reconciliation of Stock Report VS Stock Book/Trial Balance Grains Stocks and its By-Products

(Exhibit 14)

Monthly Reconciliation of Stock Report VS Stock Book/Trial Balance MTS

Exhibit 15)

Prepare the

Warehouse Semi-Annual Inventory Count Report-Grains Stocks and By-products and MTS

using the computer data base system with wide area network capability (WAN). It shall be prepared per warehouse indicating therein the variety and condition of grains stocks and its by-products and MTS counted. The data entry should be completed

on or before the 22nd day of April and October of the same year the count was conducted or on or before the 22nd day following the actual count if the count was made earlier or later than March 31 or October 30. If these dates fall on weekends or holiday, the reports shall be submitted the following working day.

The Warehouse Semi-Annual Inventory Count Report-Stocks and MTS

shall be automatically consolidated by the database system to come up with the

Provincial Semiannual Inventory Report - Grains Stocks and By-products and MTS.

The

Provincial Semiannual Inventory Report - Grains Stocks and By-products and MTS

shall in turn be automatically consolidated by the database system to come up with the

Regional Semi-Annual Inventory Report - Grains Stocks and its by-products and MTS

Method of Counting

a. A bag to bag count with 100% weighing shall be conducted if the aggregate inventory level of the warehouse during the supposed date of actual counting is 5,000 bags and below and no bag to bag count was made within a period of six months.

b. Volumetric count shall be adopted if the stock inventory level is above 5,000 bags.

c. If bag to bag counting with 100% weighing was employed or when there are no more stocks in a warehouse, management should initiate final liquidation of inventory items for sale and MTS accountability whether there is a change of accountable officer or not in order to establish cut-off of the accountability period and avoid carry-over of any shortage/overage.

Transfer/cut-off of accountability with or without change of accountable officer shall be properly documented following the usual warehouse documentation procedures. Stock transfers of accountability shall be authorized through the issuance of the Authority to Issue (AI). The WSI//WSR/ESI/ESR shall likewise be prepared to effect the transfers/receipts of accountability. The WSI/ESI shall be indicated in the current stocks report and the WSR/ESR in the new stock report.

d. Should there be a change of accountable officer any time of the year, the actual beginning and ending balances of incoming and outgoing Warehouse Supervisor, respectively, shall be determined without exemption, by conducting a bag to bag count with 100% weighing. This policy shall apply at any time of the year.

e. Accountable officers scheduled for transfer/termination/suspension/retirement shall be given priority in the liquidation of inventory items for sale, by-products, and MTS accountabilities. Thus, stocks and MTS in their respective warehouses shall be given priority in transfer out. This shall be done to lessen the volume of stocks in the warehouses in preparation for bag to bag count with 100% weighing.

f. To establish the total inventories for empty sacks, the bale method of counting shall be adopted. Before the count, the Inventory Committee shall see to it that MTS are properly baled and classified as to condition. For this purpose, MTS shall be baled using plastic sealing strap with each bale containing 500 pieces for plastic sacks of the same sizes and condition and 250 pieces for jute bags of the same sizes and condition. MTS which could not meet the required number per bale shall be baled just the same with the corresponding number of pieces indicated.

g. All grain stocks/by-products/MTS stored in NFA owned and leased warehouses/storage facilities/buying stations shall be counted.

h. All inventories held in trust by the NFA shall be included in the count to ascertain their physical existence.

Actual Count VS Derived Count

a. Actual count shall refer to the inventory balance at the date of count. Such count may either be the result of volumetric counting or bag to bag count with 100% weighing for grain stocks and its by-products and bale counting for MTS.

b. The derived count on the other hand, shall refer to the computed inventory balance as of March 31 and September 30 of each year which is obtained by adding stocks and MTS receipts to and deducting stocks and MTS issues from the actual count or cut-off date or adding back issues to and deducting receipts from the actual count depending on whether the actual inventory count was done earlier or later than March 31 and September 30 (see Formula presented in II.A.2). If the actual count was conducted on March 31 and September 30, then the actual count is also the derived count.

Physical Inventory Count Procedures

a. Before the actual physical inventory count, the concerned inventory committee shall see to it that all pertinent inventory reports/records are updated. The Provincial Accounting Section shall verify/check and adjust any variances between the Stock Report and Trial Balance.

b. To facilitate counting, the warehouse supervisor shall pile all grain stocks and bale all MTS in the warehouse in accordance with proper warehouse keeping.

c. The APM/POO/PSQAO/WSII shall determine the physical condition and location of stocks to be counted in the warehouse. Proper segregation/identification of stocks classified as Items for Sale, By Products and MTS per Trial Balance classification shall be made to facilitate the count, the computation of derived balance, and the preparation of inventory reports.

d. If possible,

receipt transactions

of grains stocks and its by-products and MTS shall be temporarily suspended during the count in the subject warehouse. On the other hand, issues can continue provided that the proper cut-off documents are determined.

e. The conduct of the count by the Provincial Inventory Committee shall be in accordance with the following procedures:

Grains Stocks and its By-Products/MTS stored in the warehouse

a) Determine the cut-off documents prior to counting and note the document numbers and date on the count sheet.

b) Prepare a warehouse layout to indicate pile positions.

c) Determine the appropriate physical counting to be used - bag to bag with 100% weighing or volumetric counting.

d) Bag to bag counting with 100% weighing

(1)

Number of Bags and Gross Weight

(a)

Using either truck scale or weighing scale, weigh the allowed number of bags in one batch of weighing

allowed number of bags will depend on the type of weighing scale/truckscale used which shall be determined by the PSQAO/RSQAO

) of the same variety of stocks to get the gross weight for the said batch of stocks.

(b)

Record the number of bags and gross weight

counted per weighing in the Weigher’s Tally Sheet

(WTS) as repiling transaction with notation “physical bag to bag counting”

(2)

Net Weight

Compute for the net weight of the stocks weighed by determining the standard weight of MTS used and deduct this from the gross weight determined in d.1 above.

e) Volumetric counting

(1)

Number of bags

No. of bags/pile = length of pile by bag x width of pile by bag x height of pile by bag.

No. of bags/pile = No. of bags/layer

x No. of layers/pile

No. of bags/layer = length of layer by bag x width of layer by bag.

No. of MTS = No. of bale x no. of pieces per bale

(2)

Average gross weight per bag in each pile:

(a)

Take samples from each pile.

Samples are to be taken from the different portions and layers of the piles. Regardless of the size of the pile, sample size shall be 30 bags per pile to be weighed at 3 trials of 10 bags each. Samples shall be randomly selected.

(b)

Divide The total weight in kilograms of all the samples by the number of bags (30) weighed to arrive at the average gross weight per bag.

(3)

Average net weight per bag

Deduct the standard weight of the MTS type used from the average gross weight per bag arrived at in e) (2)

(4)

Total net weight of stocks in each pile

) Multiply the total number of bags obtained in letter (e.1) by the average net weight computed in item (e.3).

(b)

Sum up all the total number of bags and total net weig

in all the piles for each variety of stocks.

f) Compare net kilograms computed in letter d)(2) and/or e) (4) with the corrected balances of the stock/MTS report to come up with any shortage or overage.

Grains Stored in Silos

For

silos with

flat top horizontal grain surface

with flat bottom and silos with flat top horizontal grain surface with conical bottom

(Annexes A & B)

(1)

Determine the unfilled height (Hu) and compute for

the equivalent filled height (Hf) using the formula:

Hf = H - Hu

Where: H = Height of silo from top to base (m)

Hu= Vertical distance from grain surface to top of silo (m)

(2)

Compute for the volume of the stocks using any of the following formulae:

(a)

Volume of silo with flat bottom

(Annex A)

11 D Hf
V (in cubic meter) = ---------------- 4

(b)

Volume of silo with conical bottom

(Annex B)

2 2

11D Hf1 11 D Hf2

V = ----------- + ------------

4 12

Where: Hf1 = Height of Silo(m)

Hf2 = Height of Conical

Bottom

(m)

(3)

Compute for the weight of the stocks using the formula:

Weight (net) = volume x stock density

Where stock density = 577 kilograms per cubic meter (36 lbs. per cubic feet) which is the average density of palay at 14% MC. For MC below 14% the same may be used unless more accurate density is determined.

Volume = computed volume of stocks

(4)

Compute for the equivalent number of bags using:

N = Weight / 50 kgs/bags

Note: Some silos are provided with aeration pipes inside. In such cases, the volume displaced shall be considered.

For silos with conical top grain surface

with flat bottom and silos with conical top grain surface with conical bottom

(Annexes C & D)

(1)

Determine the unfilled height (Hu) and compute for the equivalent filled height (Hf) using the formula:

Hf = H - Hu

ere:

H = height of silo from top to base (m)

(2)

Determine the average vertical distance of the cone to the grain perimeter (h) using the equation:

h + h

h = ----------

where h = cone to lowest grain perimeter (m)

where h = cone to highest grain perimeter

(m)

(3)

Compute for the

volume

of the stocks using any of the following formula:

Conical top grain surface with flat bottom

(Annex C)

total volume of silos:

11 D h

Volume of cone = -------------

2
11 D h
V = ------------ +
12

Volume of silos discussed in section B taking into account the surface height at SH

Conical top grain surface with conical bottom

(Annex D)

2 2 2

11 D h 11D Hf 1 11D h

Volume of cone = ------------+------------ +----------

12 12 12

(4)

Compute for the weight of the stocks using the formula:

Weight (net) = volume x stock density

Where stock density = 577 kgs. per cubic meter (36 lbs. per cubic feet) which is the average density of palay at 14% MC. For MC below 14% the same may be used unless a more accurate density is determined.

Volume = computed volume of stocks

(5)

Compute for the equivalent number of bags using:

N = Weight / 50 kgs/bags

Grains in Bulk Storage

In cases wherein the Provincial Office has resorted to bulk storage due to MTS shortage, the stocks thrown on the warehouse floor shall be counted using the following methods:

a) For stocks stored in bulk at one part of the warehouse in

conical shape

(Annex E)

(1)

Determine the floor area (m2) occupied by the stocks and the height (m) of the stocks in the bulk storage.

(2)

Compute for the volume of the stocks by using the following formula:

Area x Height

V= ---------------------

(3)

Compute for the weight of the stocks using the formula:

Weight (net kgs) = volume x stock density

Where Stock Density = 577 kgs per cubic meter which is the average density of palay at an average MC of 14%.

(4)

Determine the equivalent number of bags using:

N= weight / 50 kgs/bag

b) For stocks stored in bulk occupying the whole warehouse

In cases where a provincial office, due to the big volume of stocks, has resorted to

bulk type trapezoidal piling

(Annex F)

with aeration system, the following method of counting shall be used:

(1)

Determine the volume of the trapezoidal trench considering the space occupied by the triangular air duct system using the following formula:

Volume = � x y (b+L)

Where: Volume = in m

b= base of the trapezoid, m

x = width of the storage, m

y = height of the storage, m

L = length of the storage, m

Volume of triangular airduct = � dsln

d = base of the airduct, m

l = length of the airduct, m

s = height of the airduct, m

n = number of airduct used in the system

(2)

Compute for the weight of the stocks using the formula:

Weight (net kgs) = volume x stock density

Where stock density = 577 kgs per cubic meter which is the average density of palay at an average MC of 14%.

(3)

In determining the equivalent number of 50 kg bags, the formula shall be:

Weight

N = -------------

50 kgs

(4)

The approximate number of bags piled at either side of the trapezoidal trench for support shall be determined as follows:

For one side

Volume of triangular pile
No. of bags = ---------------------------------
Volume of sack used with paddy

�

= ---------------------------

(L) (W) (H)

Where: Y = height of the trapezoidal bulk storage

L = Length of the storage X1

x1 = base of the triangular pile

f. The result of the count shall be reported thru the

Warehouse Inventory Count Report-Stocks and MTS

to be prepared by the Provincial Inventory Committee.

g. The Warehouse Supervisor as a member of the Provincial Inventory Committee must always be present to witness the physical inventory taking of stocks. If he has to leave the warehouse during the count, he must designate another employee as his authorized representative.

Inventory Variances

Only one inventory variance shall be recognized in the books and this shall be the inventory count variance.

The count variance refers to the difference (shortage or overage) between the derived/actual count against the adjusted stock report/book balance. This difference shall be charged to the

Allowance for Inventory Variance Account

. The allowance account shall be adjusted every time a physical inventory count is conducted. Balance of the allowance account in quantity and amount shall be presented in the monthly schedule of inventories.

6. Inventory Reports

a. Provincial Inventory Reports

The Provincial Semiannual Inventory Report - Grains Stocks and By-products -

This is provincial consolidation of the results of the semiannual inventory count per warehouse within the same province.

The report shall be generated by the Provincial Inventory Committee from the Warehouse Semiannual Inventory Count Report-Grains Stocks and its By-Products and MTS using the computer program with wide area network capability (WAN). The Provincial Inventory Committee shall data entry the results of the physical count to come with the

Warehouse Semi-Annual Inventory Count Report-Grains Stocks and its By-Products and MTS

Source documents for the data entry and which also form part of the

Warehouse Semi-Annual Inventory Count Report-Grains Stocks and its By-Products and MTS

are as follows:

1) Inventory of Accountable Forms - This is an inventory of used and unused accountable forms under the accountability of the WSII.

Inventory Count Sheet - Grains Stocks and its By-Products and MTS

- This is the report on the results of the count conducted for grain stocks, by-products, and MTS. The report shall be prepared showing the actual stock balance per cereal type/condition/variety of grains, by-products, and MTS as counted by the Provincial Inventory Team.

3) Listings of Balances per Books and Computation of Derived Balance Grains Stocks and its By-Products and MTS - When the physical inventory taking was conducted on a date other than March 31 and September 30, a computation of the derived balance as of March 31 and September 30 of each year shall be prepared by the Provincial Inventory Committee and shall be reflected on this report. The report for the computation of derived balance for grains stocks and its by-products and MTS shall be on a per cereal type/condition/variety of grains, by-products, and MTS basis.

4) Monthly Reconciliation of the Stock Report VS Stock Book/Trial Balance Grains Stocks and its By-Products and /MTS - This is the report prepared by the Provincial Accountant reconciling the stock balance per Stock Report and stock balance per Accounting Books/Trial Balance.

The duplicate copies of the journal vouchers for the adjustments taken up as mentioned in section

No. 7 - Inventory Reconciliation Reports

shall be submitted to the Regional Inventory Committee cc: DAS for review of entries made, on or before the 22nd day of April and October or on or before the 22nd day following the actual count if the count was made earlier or later than March 31 or September 30. If these dates fall on weekends or holiday, the reports shall be submitted on the next immediate working day.

b. Regional Inventory Reports

The Regional Semiannual Inventory Report

- This is a regional consolidation of the results of the semiannual inventory count per province within the same region. This can be generated using the computer program with wide area network capability (WAN).

c. National Inventory Reports

The National Inventory Report Grain Stocks and its By-Products and MTS

- This is a national consolidation of the

Regional Semi-Annual Inventory Reports

The report shall be generated by the Central Office Inventory Committee for submission to the Administrator not later than the last working day of May and November of each year.

Inventory Reconciliation Reports

a. A

Monthly Reconciliation of the Stock Report VS Trial Balance

- Stocks & MTS

shall be prepared by the Provincial Accountant so that any bookkeeping variance can be immediately verified and corrected.

Reconciliation of the results of the provincial inventory count with the balances per inventory records/reports and book shall be from April 12 to April 20 and October 12 to October 20 of the same year for the March 31 and September 30 count respectively or on the 12th to the 20th day following the actual count if the count was made earlier or later than the March 31 or September 30.

Journal vouchers for the adjustments shall be prepared by the Provincial Accountant and shall be submitted to the Regional Office cc: DAS for consolidation and review on or before April 22 and October 22 of the same year the count was conducted or on or before the 22nd day following the actual count if the count was made earlier or later than March 31 or September 30. If these dates fall on weekends or holiday, the reports shall be submitted on the next immediate working day.

b. All hard copy reports submitted must be accurate and properly signed by the authorized signatories. Responsible officials and employees who fail to submit the required reports promptly on the set dates shall be subjected to sanctions which shall be determined and imposed by the Central Office Inventory Committee.

Accounting Treatment

a. The physical inventory count variance for inventory items for sale and miscellaneous inventories shall be recorded in the books under the account title

Allowance for Inventory Variance

A subsidiary ledger for the allowance account per cereal type per warehouse for each

accountable officer shall be maintained by the

Accounting Unit to facilitate monitoring and adjustment of the account.

b. The allowance account shall be adjusted every time a physical inventory taking is conducted whether bag-to-bag or volumetric count to come up with the corrected allowance at the date of count.

c. The inventory count of MTS is being conducted to monitor the MTS condition and the accuracy of book balance. No entry shall be made in the books in case of shortage or overage. However, a warehouse/accountable officer with material variance should be subjected to immediate liquidation of the accountabilities.

d. Subsidiary ledgers per warehouse and accountable officer shall also be maintained for the following accounts:

1) Claims for Unrelieved Losses of Current Assets

(a) Inventory Items for Sale

(b) Empty Sacks

2) Deferred Credits to Income

e. All inventory records/reports and subsidiary ledgers shall be updated and reconciled before effecting the results of semiannual physical inventory taking.

The Provincial Accountant should take note of circumstances occurring within the accounting period immediately preceding the conduct of physical inventory taking such as the following:

1) Warehouses which have been closed, vacated, or terminated but with remaining book balances.

2) The Warehouse Supervisors who have been relieved or on AWOL but with remaining book balances.

3) Accountabilities which have been liquidated but with no corresponding adjustments in the books.

Book balances occurring under the above situations shall be adjusted based on the journal entries discussed in No. 9 of this Section.

f. Damaged stocks which are reflected in the stock report as such but which have not been reclassified in the books under Miscellaneous Inventory-Damaged Stocks shall be reported in the Inventory Count Report of Inventory Items for Sale. The reason for non-reclassification shall be indicated in the “Remarks” column of the inventory report.

g. All stocks/MTS inventory adjustments arising from the physical inventory conducted shall be taken up in the Trial Balance on the month the physical inventory taking was conducted.

h. To record MTS inventory count results, similar entries as in grain inventory shall be used. However, there is no allowance provision for MTS inventory variance.

Accounting Entries

After each annual physical inventory taking, adjustments to the books of accounts shall be affected based on the following journal entries.

Physical Inventory Taking

Volumetric Count

SHORTAGE

- balance per Stock Report/Trial Balance is bigger than the balance per physical inventory volumetric count

DR 118-B-13-104 Warehousing-OE-Losses due to Physical Count xxx

CR 8-80-720 Allowance for Inventory Variance - Appropriate Inventory Account xxx

OVERAGE

- balance per Stock Report/Trial Balance is lesser than the balance per physical inventory volumetric count.

NO ENTRY

Bag to Bag Count

SHORTAGE

- balance per Stock Report/Trial Balance is bigger than the balance per physical inventory bag to bag count

DR 118-B-13-104 Warehousing-OE-Losses due to Physical count xxx

CR 8-72-360 Inventory Items for Sale-Appropriate Inventory Account xxx

DR 8-74-100 Contingent Asset-CULCA (at book value)xxx

CR 8-96-000 Contingent Capital xxx

Stock Report/Trial Balance shows negative (overage) balance but there is no physical existence per the

physical inventory bag to bag count. The Stock Report shall be adjusted to bring to zero the negative balance

DR 8-72-360 Inventory Items for Sale-Appropriate Inventory Account

xxx

CR 8-86-100 Miscellaneous Liabilities and Deferred Credits to Income-Overages xxx

OVERAGE

- balance per Stock Report/Trial Balance is lesser than the balance per physical inventory bag to bag count

The overage shall be documented with Warehouse Stock Receipt (WSR

DR 8-72-360 Inventory Items for Sale-Appropriate Inventory Account

xxx

CR 8-86-100 Miscellaneous Liabilities and Deferred Credits to Income-Overages xxx

Warehouses which have been closed, vacated or terminated but with ending balances per stock report/trial balance

SHORTAGE

- balance per Stock Report/Trial Balance is bigger than the balance per physical inventory count

DR 118-B-13-104 Warehousing-OE-Losses due to Physical Count xxx

CR 8-72-360 Inventory Items for Sale-Appropriate Inventory Account xxx

DR 8-74-100 Contingent Asset-CULCA (at book value)xxx

CR 8-96-000 Contingent Capital xxx

Stock Report/Trial Balance shows negative (overage) balance but there is no physical existence per the physical inventory count. The Stock Report shall be adjusted to bring to zero the negative balance.

DR 8-72-360 Inventory Items for Sale-Appropriate Inventory Account

xxx

CR 8-86-100 Miscellaneous Liabilities and Deferred Credits to Income-Overages xxx

Warehouse Supervisors who have been relieved or on AWOL but with with remaining book balances

SHORTAGE

- balance per Stock Report/Trial Balance is bigger than the balance per physical inventory count

DR 118-B-13-104 Warehousing-OE-Losses due to Physical Count xxx

CR 8-72-360 Inventory Items for Sale-Appropriate Inventory Account xxx

DR 8-74-100 Contingent Asset-CULCA (at book value)xxx

CR 8-96-000 Contingent Capital xxx

Stock Report/Trial Balance shows negative (overage) balance but there is no physical existence per the

physical inventory count. The Stock Report shall be adjusted to bring to zero the negative balance

DR 8-72-360 Inventory Items for Sale-Appropriate Inventory Account

xxx

CR 8-86-100 Miscellaneous Liabilities and Deferred Credits to Income-Overages xxx

Results of the Examination of the Warehouse Supervisor’s Accountability

The Provincial Accountant shall make the necessary adjusting entries based on the examination report with tolerable allowance computations and after the same has been verified by the Provincial Auditor.

SHORTAGE

No previous set up to CULCA

because the result of the bag to bag counting was an overage

Cancel the set up to Miscellaneous Liabilities and Deferred Credits to Income-Overage

DR 8-92-110 Retained Earnings - Cost of Sales (xxx

)

CR 8-86-100 Miscellaneous Liabilities and Deferred Credits to Income-Overages (xxx)

Set up the actual shortage

DR 8-74-100 Contingent Asset - CULCA (at repl cost) xxx

CR 8-96-000 Contingent Capital xxx

With previous set up of CULCA

Cancel the previous set up because it is at book value, then set up the actual shortage at replacement cost.

DR 8-74-100 Contingent Asset - CULCA (at repl cost) xxx

CR 8-96-000 Contingent Capital xxx

OVERAGE

With previous set up of CULCA

Cancel the previous set up and realize the income

DR 8-74-100

Contingent Asset - CULCA (at book value)(xxx

)

CR 8-96-000 Contingent Capital (xxx)

DR 8-86-100

Miscell.Liabilities and Deferred Credits to Income - Overage

xxx

CR 1-57-900 Miscellaneous Income - Overage xxx

OFFSET BY TOLERABLE ALLOWANCE

Cancel the previous set up to CULCA and Miscellaneous Liabilities and Deferred Credits to Income - Overages, if any.

DR 8-74-100

Contingent Asset-CULCA (at book value) (xxx)

CR 8-96-000 Contingent Capital (xxx)

DR 8-92-110

Retained Earnings - Cost of Sales (xxx)

CR 8-86-100 Miscellaneous. Liabilities & Deferred Credits to Income - Overage (xxx)

Collection of Payment for Shortage

CASH PAYMENT

DR 8-70-400

Cash-Collecting Officer xxx

CR 8-74-100 Contingent Asset - CULCA (at repl cost) xxx

corollary entry

DR 8-96-000

Contingent Capital x

DR 8-92-110 Retained Earnings - Operating Expenses (xxx)

PAYMENT-IN-KIND

DR 8-72-360

Inventory Items for Sale - Appropriate

Inventory Account xxx

CR 8-74-100

Contingent Asset - CULCA (at repl cost) xxx

corollary entry

DR 8-96-000

Contingent Capital xxx

DR 8-92-110 Retained Earnings - Operating Expenses (xxx)

All rulings, policies, and/or issuances inconsistent herewith are hereby superseded.

This SOP shall take effect upon approval of the Administrator.

ANTHONY R.A. ABAD
Administrator, NFA

Date approved:
____________

III. RESPONSIBILITIES

IV. FLOW CHART
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EXHIBITS

Silo With Flat Bottom -- Annex A

Silo with Conical Bottom -- Annex B

Conical Top Grain Surface with Flat Bottom -- Annex C

Conical Top Grain Surface with Conical Bottom -- Annex D

Conical Shape -- Annex E

Silo With Flat Bottom -- Annex A
Silo with Conical Bottom -- Annex B
Conical Top Grain Surface with Flat Bottom -- Annex C
Conical Top Grain Surface with Conical Bottom -- Annex D
Conical Shape -- Annex E