Skip to main content

*Taking a Physical Inventory

Taking a Physical Inventory​

Please read the following instructions completely before beginning. If you have any questions please contact Support.

  • In a physical inventory, you want to count the actual number of units of each item on hand and later compare it to the number of units the computer says is on hand. At the end of each fiscal year, you will reset your year-end totals; this moves the current year sales and purchases data to the prior year and resets the year-to-date sold, purchased, and received totals for all items in inventory.
  • You CANNOT reset your inventory or any inventory item more than ONCE. If you reset the inventory or any individual part more than once, the history of that part or parts will be LOST.
  • If you reset AFTER you have entered your count, it will erase ALL the entered counts and they will have to be entered again.
  • You CANNOT reset by Location.
  • You CAN reset by LIST, but it is not recommended. If you decide to reset by list, be SURE that you reset each inventory item, all items are covered by a list and that you do not duplicate a part number on more than one list or it will reset the duplicated part twice.
  • Your physical inventory process consists of these activities:
  • Create inventory lists using the Report Generator program.
  • Use the program Print Count Sheets to print count sheets using the inventory lists created above.
  • Run the program Reset Year-End Totals.
  • Decide if you can halt sales, purchasing, and receiving activities. If you can’t, track sales before the count is performed.
  • Physically count your inventory quantities.
  • Begin sales if halted.
  • Enter the ACTUAL physical inventory quantities off your count sheets through the program Enter Physical Inventory.
  • Print the Physical Inventory Extension and Physical Inventory Variance reports.
  • Run the program Move Physical to On Hand.
  • Begin purchasing and receiving activities.
  • Adjust the General Ledger for any variances.

1. Create Inventory Lists

**Important things to Remember**

  1. When using your list to enter in counts, it is important to enter in counts for all items in the list. A list cannot be stopped mid-way through and then picked up again where you left off at another time. To avoid this, create smaller lists that you will be able to complete by the end of the day.

  • DockMaster uses the Report Generator program to create and save inventory lists. It is important that you have a working knowledge of this program to produce lists with the desired data.

  • DockMaster uses inventory lists to facilitate the physical count process. Instead of using one large inventory printout and hunting for each item, you should create lists by stockroom location, department, class, vendor, etc. You will use these lists to print your count sheets and again when entering your actual inventory quantities through the Enter Physical Inventory program.

  • The Stockroom Location field in the Inventory File is very helpful when creating these lists. If your parts room is laid out by bin or shelf locations (i.e. SHELF10, BIN5, etc.), then you can print your count sheets by stockroom location to speed up the physical count process.

  • Important: It is a common misconception that inventory lists created on a certain date can be used later to report on inventory as it stood on that date. This is incorrect. These lists only contain part numbers; the entire inventory record is not set aside. When reporting with lists, you are pulling the current inventory information.

2. Print Count Sheets

  • The program Print Count Sheets will use the DockMaster Report Generator to print count sheets. The default Count Sheet Report will include ALL Inventory Items with a Stockroom Location. To print a Count Sheet Report for a list of Inventory items, simply enter the list name you want to use in the List Name prompt on the Report Main tab.

  • The Sort Options, Information Options, and Specific values are already pre-defined; you can change these options if desired. The default count sheet format displays the Part Number, Stockroom Location, Description, Unit of Measure, and a blank column to enter the quantity counted.

  • For users with multi-location inventory, this report can be printed by location. Note: All reports default to Location 1. If you maintain a multi-location inventory system, you will have to add a specific value to print this report for another location.

  • Important: If you will be entering your physical counts directly from your count sheets, be sure to use the same sort option(s) you used when creating the list.

3. Reset Year-End Totals

The Reset Year-End Totals program will allow you to:

  • Roll your Inventory History - this moves the current year sales and purchases data to the prior year.
  • Clear year-to-date sales and purchasing information that resets the year-to-date sold, purchased, and received totals to zero for all items in inventory or a list.

If you cannot count your total inventory without halting all sales and receiving activity, then you can reset using the same lists you used when printing your count sheets. This will allow you to count your inventory in sections while halting sales and receiving for only those items while the count takes place.

Important: If you cannot stop sales and receiving activity between the time you reset your year-end totals and physically count your inventory, then you MUST manually track all sales and receipts and adjust your physical count for those items sold prior to entering the count into the system through the program Enter Physical Inventory.

The accumulated sales and receipts that occur AFTER the count takes place can be accounted for during the Move Physical to On Hand program. For example, assume the following scenario:

  • Reset Year-End Totals. Part number CJ14 now has year-to-date sales of zero (0).
  • Count your inventory. There are ten (10) CJ14's in stock.
  • You sold four (4) CJ14's and received two (2) before you entered the quantity into the system through the Enter Physical Inventory program.
  • When you enter the physical count of ten (10) into the system, DockMaster can automatically adjust for the sale of four (4) and receipt of two (2), making the current quantity on hand eight (8). [You have the choice of having the system use the accumulated sales and purchases when you use the program Move Physical to On Hand.
  • If you had reset your totals and then sold four (4) and received two (2) BEFORE you counted your inventory, then your physical count should have been eight (8). Enter this and tell the system to ignore the accumulated sales and purchases during the Move Physical to On Hand.

4. Take a Physical Count

The ideal method for taking a physical count of your inventory is to stop all sales and receiving activity and count your inventory. Since this is not always feasible, DockMaster allows you to count your inventory in sections (lists) and perform the whole physical inventory process on each section counted.

**Important Note** If you are unable to stop sales and purchasing during the Move Physical to Quantity on Hand process, then you must track items sold and received after the year-end reset but before the shelf has been counted. The physical count must be adjusted to include these quantities before entry in DockMaster. If you do not, your quantity on hand will be incorrect. In the following example we are assuming that you have answered ‘yes’ to Clear Year-to-Date Sales and Purchases during the Reset Year End process and that you will be answering ‘yes’ to Use Accumulated Sales and Purchases during the Move Physical to Quantity on Hand process.

Example: Let’s assume that at the time you do your reset, part ABC has 12 items on the shelf. After your reset was run but before you counted the item ABC, 3 items were removed from the shelf and sold. When you count the item and enter your count on your list, you will show 9 items on the shelf. Once you have entered the actual physical counts on your count sheets, you must go back and adjust those counts by the number of items sold. Therefore, you would replace the 9 with 12 for part ABC. These adjusted quantities are then entered as your physical inventory counts.

The section Move Physical to On Hand explains how DockMaster uses the new year-to-date figures to calculate the quantity on hand.

5. Enter Your Physical Inventory

  • The Enter Physical Inventory program allows you to enter your ACTUAL physical count using the same lists you used when the count sheets were printed. The program will bring up each part number in the same order as the count sheet and allow you to enter a quantity. The Replace method overwrites any previous physical count entry. The Add method adds the current physical count entry to the previous physical count.

6. Print Inventory Reports

Physical Inventory Extension Report

Print the Physical Inventory Extension Report to display the value of the physical inventory entered. This report includes the physical count and extended dollar amount (physical count X weighted average cost). For users with multi-location inventory, this report can be printed by location. Note: All reports default to Location 1. If you maintain a multi-location inventory system, you will have to add a specific value to print this report for another location.

Perpetual Inventory Extension Report

Print the Perpetual Inventory Extension Report to display the value of your current On Hand inventory. This report displays the weighted average cost, quantity on hand, unit of measure, and the extended cost (weighted average cost X quantity on hand). The report will only display parts with a quantity on hand (negative or positive) not equal to zero. For users with multi-location inventory, this report can be printed by location. Note: All reports default to Location 1. If you maintain a multi-location inventory system, you will have to add a specific value to print this report for another location.

Physical Inventory Variance Report

Print the Physical Inventory Variance Report to review the differences in the current quantity on hand and the physical count entered. The report will only display parts with a variance.

  • The figures on this report can be used to enter the inventory adjustment amount in the General Ledger. This report is sorted by part number and displays the quantity on hand and dollar value, physical count and dollar value and the variance quantity and dollar value.

  • For users with multi-location inventory, this report can be printed by location. Note: All reports default to Location 1. If you maintain a multi-location inventory system, you will have to add a specific value to print this report for another location.

7. Move Physical to On Hand Quantity

  • The program Move Physical to On Hand takes your physical count quantities and overwrites the current quantity on hand. If you want the system to take into account any sales and purchasing activity that occurred after you reset year-end totals, click the prompt Use Accumulated Sales and Purchases. Otherwise the counts you enter will be the quantity that gets moved to Quantity on Hand.

  • You can also use the same lists created in step one of the physical inventory process to move your quantities.

8. Adjust the General Ledger

  • A simplified accounting entry to adjust for a negative variance between your physical inventory and the General Ledger would be:

DEBIT  Inventory Shrinkage

CREDIT   Inventory