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Perpetual inventory system in coca cola

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Perpetual inventory system in coca cola

  1. 1. Presented To,SIR KAMRAN
  2. 2. Presented ByASIF HUSSAINStudent ID AR524304
  4. 4. Introduction of the organizationFounded in 1886, the Coca-cola company isthe world’s leading manufacturer, marketer,and distributor of nonalcoholic beverages,concentrates and syrups. The company’s corporate headquarters arein Atlanta, with local operations in over 200countries around the world.
  5. 5. History of the organizationThe Coca Cola company is a global company. In Pakistanthe company started it’s business in 1953. Today thecompany has a major share in beverage market. Thecompany has its production units at Karachi, Multan,Faisalabad, Rahimyar Khan, Gujranwala, & Lahore.The company provides a fair amount of employment tolocal citizens and deeply involved in the life of localcommunities in which it operates .
  6. 6. Vision mission & values Vision: “To become a market leader in ready to drink segmentwhile adding best-in-class value to all stakeholders”. Mission: “ CCBPL exists to refresh the consumers, inspire momentof optimism through our brands & actions as well asbenefits all stakeholders, which we will do with highestsocial responsibility & with uncompromising commitmenttowards quality of our products & Integrity in ouroperation.” Integrity in our operation.”
  7. 7. Vision mission & valuesValues:We value & respect our people.We communicate openly.We have integrity.We win as a team.We drive quality & innovation.We are accountable.
  8. 8. Introduction to the topicIn business and accounting/accountancy, perpetualinventory or continuous inventory describes systemsof inventory where information on inventory quantityand availability is updated on a continuous basis as afunction of doing business.A method of accounting for inventory that records the saleor purchase of inventory in near real-time, throughthe use of computerized point-of-sale and enterpriseasset management systems. Perpetual inventoryprovides a highly detailed view of changes ininventory and allows real-time reporting of theamount of inventory in stock; hence, accuratelyreflecting the level of goods on the perpetualinventory system is intended as an aid to materialcontrol
  9. 9. Introduction to the topicUnder the perpetual inventory system, an entity continuallyupdates its inventory records to account for additions toand subtractions from inventory for such activities asreceived inventory items, goods sold from stock, and itemspicked from inventory for use in the production proces.Perpetual inventory is by far the preferred method for trackinginventory, since it can yield reasonably accurate results onan ongoing basis, if properly managed. Perpetual inventory system comprises of: (a) Comparison of Bin Cards (quantitative perpetualinventory) and Stores Ledger Accounts (quantitative-cum-valued perpetual inventory),(b) Continuous Stock-Taking(Physical perpetual inventory)
  10. 10. Introduction to the topicAdvantages:1. Greater control over stock2. Slow-moving and fast-moving lines of inventorycan be identified.3. Reordering of inventory is more efficient.4. Interim profit reports can be prepared withoutdoing a stock take.5. The level of stock losses or gains can be measured.
  11. 11. Introduction to the topicDisadvantages:1. Additional record-keepingIncrease workload, increase in staff.2. Additional costsStaff costs, costs of computer package tomaintain inventory records.3. The need for a physical stock take at the end of thereporting period is not eliminated.
  12. 12. First-in-first-out stock valuationAssumes that the first inventorypurchased is the first inventory sold.Firms normally try to keep stock movingin line with purchases dates to preventold items from being shop-soiled,outdated.
  13. 13. Practical study in organizationAccounts system in CCBPLThe Coca Cola Beverages Pakistan has a centralizedmanagement structure in the organization. The top mostauthority is the COCA COLA Corporate office at Lahore,where all the heads of respective departments are posted.Accounts are being headed by the Chief Financial Officer,who is the in charge off major financial and accountsmatters.At the territory units the officers in charge of the accountsand finance departments are called FINANCE LEADER. Atlower level officers are called inventory controllers.
  14. 14. Practical study in organizationInventory Accounting PolicyInventories consist primarily of raw materials andpackaging (which includes ingredients and supplies)and finished goods (which include concentrates andsyrups in Coca-Cola Companys concentrate operations,and finished beverages in finished product operations).Inventories are valued at the lower of cost or market.Coca-Cola Company determines cost on the basis of theaverage cost or first-in, first-out methods(FIFO).
  15. 15. Practical study in organizationThe COCA COLA BEVERAGES PAKISTAN is currentlyoperating and using the FIFO (first in first out) methodfor its inventories in the accounts and financedepartments. However the actual information of theinventories can not be disclosed and provided here as itis the company’s confidential matter.First-in-first-out stock valuationFirms normally try to keep stock moving in Assumesthat the first inventory purchased is the first inventorysold.line with purchases dates to prevent old items frombeing shop-soiled, outdated.
  16. 16. Inventory DisclosureCoca-Cola Co., Statement of Financial Position, InventoryUSD $ in millionsDec 31,2012Dec 31, 2011 Dec 31,2010Dec 31,2009Rawmaterial &packaging1,773 1,680 1,425 1,366Finishedgoods1,171 1,198 1,029 697others 320 214 196 291inventories 3,264 3,092 2,650 2,354
  17. 17. Item Description The companyRaw materials andpackagingCarrying amount as of thebalance sheet date ofunprocessed items to beconsumed in themanufacturing orproduction processCoca-Cola Co.s rawmaterials and packagingincreased from 2010 to 2011and from 2011 to 2012.Finished goods Carrying amount as of thebalance sheet date ofmerchandise or goods held bythe company that are readilyavailable for sale.Coca-Cola Co.s finishedgoods increased from 2010to 2011 but then slightlydeclined from 2011 to 2012.Inventories Carrying amount (lower ofcost or market) as of thebalance sheet date ofinventories less all valuationand other allowances.Coca-Cola Co.sinventories increasedfrom 2010 to 2011 andfrom 2011 to 2012.
  18. 18. FIFO - ExamplePurchases SalesDate Lot No Qty UnitcostTotal Date Qty Unit SPJan 1 1 50 6.0 300 Jan 4 40 12.06 2 50 6.2 310 9 30 12.513 3 50 6.5 325 18 20 12.524 4 50 6.6 330 31 50 12.9Total 200 1,265 140
  19. 19. FIFO – Example (Cont’d)Cost of sales Stock on handQuantity Unit cost Value Quantity Unit cost Value50 6.0 300 10 6.5 6550 6.2 310 50 6.6 33040 6.5 260 60 395140 870
  21. 21. Strengths(1) Easy detection of errors.(2) Better control over stores.(3) Acts as internal check.(4) Early detection of loss of stock.(5) Accurate and up-to-date accounting records.(6) Availability of correct stock data.(7) Easy to prepare interim accounts.(8) Slow-moving and fast-moving lines of inventorycan be identified.
  22. 22. Weaknesses1) Many perpetual inventory systems are expensive.(2) Companies must find accountants who can workthe system and manage frequent changes to thegeneral ledger.(3) Perpetual inventory systems are often time-consuming.(4) costs of computer package to maintain inventoryrecords.
  23. 23. Opportunities. New information technology tools can provide quickerdata sharing between CCBPL various units.2. More specializedpersonnels can be hired.3. Data can be accessed from every where of the worldthrough the technology.4. Frequent updating of records and data entries can beestablished.
  24. 24. Threats1. Risk of human error.2. Persistent errors can also cause furthercomplications.3. Reporting inaccurate inventory figures can triggeran audit, resulting in potential problems for thecompany
  25. 25. CONCLUSIONWe have discussed our topic THE PERPETUALLINVENTROY SYSTEM in general and with specificreference to the COCA COLA COMPANY. I tried toexplain the perpetual inventory system, its nature anduses in the accounts and finance system of businessand organization. Organizations like THE COCACOLA COMPANY have large volumes of business andso they require a system of accounts that can beaccurate and prompt as well as easy to maintain andmanage. However, it is the company’s decision toadopt a suitable system for accounts and financeaccording to its organizational structure.
  26. 26. RECOMMENDATIONSWe discussed the perpetual inventory system in the COCA COLACOMPANY. Here are some recommendations for theimprovement.1- A detailed and comprehensive data base must beestablished.2- All information should be included in the data base.3- Competent and qualified personnel should be hired forthe accounts management.4- New advanced technology should be utilized for theaccounts management.5- Untrained staff and inventory officers should be providedwith trainings in new approaches of inventory managementand data processing.6- The organization must provide training opportunities toits workers and officers to minimize the factor of humanerror in data entry in inventories.
  27. 27. DATA COLLECTION SOURCES ANDREFERENCE Web and internet Wikipedia Accounting Tools.(website) Preserve Articles.(website) The Coca Cola Company, official website Staff and members of CCBPL, Sialkot & Gujranwala