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Perpetual inventory system in coca cola

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Perpetual inventory system in coca cola

  1. 1. Assignment Report:Of Accounting;Perpetual Inventory system inCoca Cola Beverages Pakistan LimitedStudent ID:- AR524304MBA ( HRM))Submission Date:.22 /04/2013SUBMITEDTO :Mr KamranPage | 1SUBMİTTED BY :-ASİF HUSSAİN
  2. 2. [COCA-COLA BEVERAGES PAKISTAN LTD ]DEDICATIONI want to dedicate this effort of mine to all my teachers, friends andcolleaguess as well as my seniors who have helped me and guided me and Ialso dedicate this effort to my family especially father who is a role modeland my guide in every part of my life. I am very thankfull to all of them.ACKNOWLEDGEMENTAll the praises are for Almighty ALLAH. By the grace of whom, I have completed myinternship successfully.I would like to acknowledge and extend my heartfelt gratitude to the following personswho supported me throughout my great experience of the report and provided me moralsupport and helped me whenever I needed.• My course instructor, who helped me throughout my report and my semester.2
  3. 3. [COCA-COLA BEVERAGES PAKISTAN LTD ]• Management of Coca-Cola Beverages Pakistan Limited, Sialkot for providing methe great opportunity of report and all necessary information and materialregarding my report.• Whom I come to contact during the course of my internship as well as preparationof this report. I am fortunate to have many excellent seniors and colleagues whoprovided much useful advice with their knowledge & experience.At the end, I am very obliged to my family and friends who were always there by my sideto guide me and gave me courage that I can do the best in my life.ABSTRACTIn business and accounting/accountancy, perpetual inventory or continuous inventorydescribes systems of inventory where information on inventory quantity and availabilityis updated on a continuous basis as a function of doing business. Generally this isaccomplished by connecting the inventory system with order entry and in retail the pointof sale system. In this case, book inventory would be exactly the same as, or almost thesame, as the real inventory.A method of accounting for inventory that records the sale or purchase of inventory innear real-time, through the use of computerized point-of-sale and enterprise assetmanagement systems. Perpetual inventory provides a highly detailed view of changes ininventory and allows real-time reporting of the amount of inventory in stock; hence,accurately reflecting the level of goods on the perpetual inventory system is intended asan aid to material control. It is a system of stock control followed by stores department.3
  4. 4. [COCA-COLA BEVERAGES PAKISTAN LTD ]The system follows a method of recording stores by which information about eachreceipt, issue and current balance of stock is always available.In this study I have tried to explain the term perpetual inventory system in accounting.For my study of organization I have selected the Coca Cola Beverages Pakistan limited.This is the prestigious organization in beverage industry and a part of a multinationalcorporation named The Coca Cola International. I tried to explain the accounts system inCoca Cola Company with reference to Perpetual Inventory System.I am sure that this effort of mine will be a source of knowledge for all of us.INTRODUCTION OF ORGANIZATION BUSINESS SECTORThere are four key economic business sectors:Primary sector: - Engaged in raw material extraction such as mining and farming.Secondary sector: - Involves refining, construction and manufacturing.Tertiary sector: - Deals with services such as law and medicine and distribution ofmanufactured goodsQuaternary sector: - Relatively new type of knowledge industry focuses ontechnological research, design and development such as computer programming andbiochemistry.According to the above scenario, CCBPL falls in the secondary sector as the mainfunction of CCBPL is manufacturing soft drinks to refreshes its customers.Beverage:-“A liquid made up of particular ingredients to develop the taste and refreshment is knownas beverage.”Beverage Industry in Pakistan:Pakistan beverage industry has the international names offering the best qualitybeverages across the country. It is an industry in which players continuously innovate, inorder to come up with better products as compared to the competitors to gain more4
  5. 5. [COCA-COLA BEVERAGES PAKISTAN LTD ]consumers and satisfy the existing consumers. Now-a-days beverages become animportant part of the lives of people as it is a consumer consumable good. Usage of softdrinks is become a trend now a days.IntroductionInternationally:Coca-Cola laid the foundation of the beverage industry when it was formed in May 1886in Atlanta. However it was not until 1895 that the idea of selling coke in bottles wasintroduced. With the passage of time Coca-Cola gained popularity and its product beganto get recognized internationally. Thus from its mere beginning in 1886 Coca-Cola hasnow been transformed into a strong multinational with its product being currentlyrecognized all over the world. Coca-Cola, in fact, has now become one of the mostfamous and widely consumed brands in the world. It has not only established its footingsin the beverage industry but is currently heading the list of the most financially soundcompanies in the worldPakistan:The Coca-Cola Company is a global company with some of the worlds most widelyrecognized brands, the Coca-Cola business in Pakistan has completed its 50 years ofoperation. The beverages are produced locally, employing Pakistani citizens. And their5
  6. 6. [COCA-COLA BEVERAGES PAKISTAN LTD ]product range and marketing reflects Pakistani tastes and lifestyles, and they are deeplyinvolved in the life of the local communities in which they operate.Mr. John Seward is the current of CCI at CCBPL plants in Pakistan. The Coca Colainternational was established in Atlanta in 1886. Currently Coca Cola international isconducting its operations in more than 200 countries around the world. The numbers ofemployees who are working with Coca Cola international are 92,400 worldwide. InPakistan CCBPL is conducting its operations from last 58 years. In Pakistan, CCBPLstarted its business in 1953. CCBPL stands for Coca Cola Beverages Pakistan ltd.VISION“To become a market leader in ready to drink segment while adding best-in-class value toall stakeholders”MISSION“Coca-Cola Pakistan exists to refresh the consumers, inspire moments of optimismthrough our brands and actions as well as benefit all stakeholders, which we will do withhighest social responsibility and with uncompromising commitment towards quality ofour products and integrity in our operations”VALUES We value and respect our people We communicate openly We have integrity We win as a team We drive quality and innovation We are accountable6
  7. 7. [COCA-COLA BEVERAGES PAKISTAN LTD ]PRODUCTSCoca Cola Beverages Pakistan has the following brands in different packs for theconvenience of its customers in Pakistan.Brands:Coca-Cola® Coke Diet® Fanta®Sprite 3G® Sprite® Sprite Zero®Two type of juices are also been introduced in PakistanPulpy Orange®Pulpy Tropical®Coca Cola Beverages Pakistan has introduced mineral water as wellKinley®7
  8. 8. [COCA-COLA BEVERAGES PAKISTAN LTD ]Competitors:There are many different competitors in the market but the PEPSI is the main competitorof Coca Cola Beverages. Let’s have a look at the brands of PEPSI which are competingthe brands of Coca Cola in the market.Pepsi® Miranda® Mountain Dew®7UP® 7UP Zero® Teem®Pepsi has introduced the following brand to compete the juices of Coca Cola Beverages.Slice®Pepsi has introduced mineral water as well to compete the kinley.Aquafina®Pepsi has introduced its energy drink in two flavors as well to attract the customersSting®There are other many brand names of different companies which are as follows:Gourmet, Shezan, Makah Cola, Murree Brewery, Tops etc.8
  9. 9. [COCA-COLA BEVERAGES PAKISTAN LTD ]INTRODUCTION TO THE TOPICWhat is Perpetual Inventory System?The perpetual inventory system is intended as an aid to material control. It is a system ofstock control followed by stores department. The system follows a method of recordingstores by which information about each receipt, issue and current balance of stock isalways available.The Institute of Cost and Management Accountants of England and Wales, definesperpetual inventory as "A system of records maintained by the controlling department,which reflects the physical movement of stocks and their current balances."According to Weldon, "Perpetual inventory system is a method of recordings storesbalances after every receipt and issue, to facilitate regular checking and obviate closingdown of work for stock-taking."Thus, it is a system of ascertaining current balance after recording every receipt and issueof materials through stock records. An important point which should be kept in mind isthat the perpetual inventory is usually checked by a programme of continuous stock-taking. Perpetual inventory means the system of it cords whereas continuous stock-takingmeans the physical checking of those records with actual stocks. Definition of Perpetual InventoryA method of accounting for inventory that records the sale or purchase of inventory in near real-time, through the use of computerized point-of-sale and enterprise asset management systems.Perpetual inventory provides a highly detailed view of changes in inventory and allows real-timereporting of the amount of inventory in stock, hence, accurately reflecting the level of goods onhand.9
  10. 10. [COCA-COLA BEVERAGES PAKISTAN LTD ]Investopedia explains PerpetualInventoryA perpetual inventory system is superior to the older periodic inventory systems because it allowsfor real-time tracking of sales as well as inventory levels for individual items, helping to preventstock outs. A perpetual inventory also does not need to be adjusted manually by the companysaccountants except to the extent it disagrees with the physical inventory count due to loss,breakage or theft.From Wikipedia, the free encyclopediaIn business and accounting/accountancy, perpetual inventory or continuous inventorydescribes systems of inventory where information on inventory quantity and availabilityis updated on a continuous basis as a function of doing business. Generally this isaccomplished by connecting the inventory system with order entry and in retail the pointof sale system. In this case, book inventory would be exactly the same as, or almost thesame, as the real inventory.In earlier periods, non-continuous, or periodic inventory systems were more prevalent.Starting in the 1970s digital computers made possible the ability to implement a perpetualinventory system. This has been facilitated by bar coding and lately radio frequencyidentification (RFID) labeling which allows computer systems to quickly read andprocess inventory information as part of transaction processing.Perpetual inventory systems can still be vulnerable to errors due to overstatements(phantom inventory) or understatements (missing inventory) that can occur as a result oftheft, breakage, scanning errors or untracked inventory movements, leading to systematicerrors in replenishment.The ESA95 recommends the Perpetual Inventory Method (PIM) for the calculation of thestock of Fixed assets whenever direct information is missing (par. 6.04). The calculationof consumption of Fixed capital can be based on these stocks of assets. Besides netcapital stock which appears in the Balance sheets can be derived within a PIM approach.In this paragraph the basic principles of the PIM will be discussed. Using the PIM, grosscapital stock is calculated as the sum of gross fixed capital formation in Previous years,of which the service live is not yet expired. In the simplest case it is assumed that thetotal investment of a particular asset does not deteriorate during the expected service lifeof that asset and is discarded as a whole after that period of time.10
  11. 11. [COCA-COLA BEVERAGES PAKISTAN LTD ]Perpetual inventory system comprises of:(a) Comparison of Bin Cards (quantitative perpetual inventory) and Stores LedgerAccounts (quantitative-cum-valued perpetual inventory),(b) Continuous Stock-Taking (Physical perpetual inventory)(a) Comparison of Bind Cards and Stores Ledger AccountBin card is maintained by the store-keeper and stores ledger account is maintained bystores accountant. Each item of stores is recorded at these places simultaneously.Normally the balances shown by the two records tally. However, th6re may arise somedifferences between these two records due to the following reasons:(i) Omission of an item of store in bin card or stores ledger account.(ii) Wrong posting of an item of store either in bin card or in stores ledger account.(iii) Arithmetical error in working out their balances. Therefore, the balances of the tworecords should be reconciled at frequent intervals and correct balances should be drawn.(b) Physical Stock VerificationThe perpetual inventory system is not complete without a systematic procedure forphysical verification of stores. The correctness of balances as shown in the bin card orstores ledger account should be verified by means of physical stock verification. Physicalstock verification may be conducted in the following two ways:(i) Periodic stock verification(ii) Continuous stock verification(i) Periodic stock verification: It refers to a system where physical stock verification isnormally done periodically, i.e., once or twice in a year. Under this method, value ofstock is determined by physical counting of the stock on a particular date, usually at theend of the year.It is a simple and economical method of stock-taking and is adopted in small concerns.This type of verification is good only for the items which do not find place in theperpetual inventory records, e.g., works-in-progress, components and consumable storesat site etc. But there are many limitations of this method. Stores may be closed down fora few days to facilitate stock-taking. There is possibility of fraud] discrepancy, etc.(ii) Continuous stock verification: This system comprises of counting and verifying inumber of items at random daily throughout the year so that all items of stores areverified several times during the year. Notice of the particular stock to be verified eachclay is given to the store-keeper only on the date of actual verification.11
  12. 12. [COCA-COLA BEVERAGES PAKISTAN LTD ]As there is an element of surprise check in this system of stock-taking, effective controlover the items of stores can be exercised. The system does not necessitate the closingdown of the stores to facilitate stock-taking. There is also less possibility of fraud anddiscrepancy, but the method is expensive and is adopted by big concerns only.The actual stock of material should not differ from the recorded stock under normalcircumstances. But-sometimes differences arise due to the following reasons:(i) Breakage and wastage of materials due to improper handling.(ii) Shrinkage and evaporation.(iii) Losses due to accident, fire, etc.(iv) Losses arising out of breaking up bulk materials.(v) Losses due to theft.(vi) Misrouting in bin card or stores ledger account.(vii) Over or short-issue.The application of the Perpetual Inventory Method (PIM) requires estimates andassumptions on threeparameters:service life2- discard pattern3- depreciation methodPerpetual Inventory System OverviewUnder the perpetual inventory system, an entity continually updates its inventory recordsto account for additions to and subtractions from inventory for such activities as receivedinventory items, goods sold from stock, and items picked from inventory for use in theproduction process. Thus, a perpetual inventory system has the advantages of bothproviding up-to-date inventory balance information and requiring a reduced level ofphysical inventory counts. However, the calculated inventory levels derived by a12
  13. 13. [COCA-COLA BEVERAGES PAKISTAN LTD ]perpetual inventory system may gradually diverge from actual inventory levels, due tounrecorded transactions or theft, so you should periodically compare book balances toactual on-hand quantities.Perpetual inventory is by far the preferred method for tracking inventory, since it canyield reasonably accurate results on an ongoing basis, if properly managed. The systemworks best when coupled with a computer database of inventory quantities and binlocations, which is updated in real time by the warehouse staff using wireless bar codescanners, or by sales clerks using point of sale terminals. It is least effective whenchanges are recorded on inventory cards, since there is a significant chance that entrieswill not be made, or will be made incorrectly.Balance sheets complete the sequence of accounts, showing the ultimate result of theentries in the production, distribution and use of income, and accumulation accounts.Balance sheets and accumulation accounts form a group of accounts that are concernedwith the value of assets owned by institutional units or sectors, and their liabilities atparticular points in time and with the evolution of those values over time. Balance sheetsmeasure the values of stocks and are compiled at the beginning and end of the accountingperiod. On the other hand, the accumulation accounts record the changes in the values ofassets and liabilities during the accounting period. They are flow accounts, whose entriesdepend on the amounts of economic or other activities that take place within a givenperiod of time.In the balance sheets three categories of assets are distinguished:a) non-financial produced assetsb) non-financial non-produced assetsc) financial assetsDIFFERENCES BETWEEN PERIODIC AND PERPETUALINVENTORY:Periodic – During the period, the inventory account is not change; thus, it reflects thebeginning inventory amount. During the period, each purchase is recorded in thePurchases account. As a consequence, the ending inventory eache period must bemeasured by physical count, then ”costed” at unit price cost. b. Perpetual - During theperiod, the Inventory account is increased for each purchase and decreased (at cost) foreach sale13
  14. 14. [COCA-COLA BEVERAGES PAKISTAN LTD ]ADVANTAGES OF PERPETUAL INVENTORY OVER PERIODICINVENTORY :It provides continuous inventory amounts It provides the cost of goods sold amountwithout the necessity of taking a periodic inventory count. It provides continuinginformation necessary to maintain minimum and maximum inventory levels byappropriate timing of purchases. It provides continuing information about the quantity ofgoods on hand at various locations. It provides a basis for measuring the amount of theft.It provides cost of goods sold information needed to record sales at both selling price andcost. It is readily adaptable to use of computers to process quickly large quantities ofinventory data.Perpetual Inventory Journal Entries:The following example contains several journal entries used to account for transactions ina perpetual inventory system:1. To record a purchase of $1,500 of widgets that are stored in inventory:Debit CreditInventory 1,500Accounts payable 1,5002. To record $300 of inbound freight cost associated with the delivery of inventory:14
  15. 15. [COCA-COLA BEVERAGES PAKISTAN LTD ]Debit CreditInventory 300Accounts payable 3003. To record a sale of widgets from inventory for $3,000, for which the associatedinventory cost is $1,800:Debit CreditAccounts receivable 3,000Revenue 3,000Cost of goods sold 1,800Inventory 1,8004. To record a downward inventory adjustment of $800, caused by inventory theft, anddetected during an inventory count:Debit CreditInventory shrinkage expense 800Inventory 80015
  16. 16. [COCA-COLA BEVERAGES PAKISTAN LTD ]First-In, First-Out (FIFO) is one of the methods commonly used to calculate the valueof inventory on hand at the end of a period and the cost of goods sold during the period.This method assumes that inventory purchased or manufactured first is sold first andnewer inventory remains unsold. Thus cost of older inventory is assigned to cost of goodssold and that of newer inventory is assigned to ending inventory. The actual flow ofinventory may not exactly match the first-in, first-out pattern.First-In, First-Out method can be applied in both the periodic inventory system and theperpetual inventory system.ExampleUse the following information to calculate the value of inventory on hand on Mar 31 andcost of goods sold during March in FIFO periodic inventory system and under FIFOperpetual inventory system.Mar 1 Beginning Inventory 60 units @ $15.00 per unit5 Purchase 140 units @ $15.50 per unit14 Sale 190 units @ $19.00 per unit27 Purchase 70 units @ $16.00 per unit29 Sale 30 units @ $19.50 per unitSolutionFIFO PeriodicUnits Available for Sale = 60 + 140 + 70 = 27016
  17. 17. [COCA-COLA BEVERAGES PAKISTAN LTD ]Units Sold = 190 + 30 = 220Units in Ending Inventory = 270 − 220 = 50Cost of Goods Sold Units Unit Cost TotalSales From Mar 1 Inventory 60 $15.00 $900Sales From Mar 5 Purchase 140 $15.50$2,170Sales From Mar 27 Purchase 20 $16.00 $320220 $3390Ending Inventory Units Unit Cost TotalInventory From Mar 27 Purchase 50 $16.00 $800FIFO PerpetualDate Purchases Sales Balance17
  18. 18. [COCA-COLA BEVERAGES PAKISTAN LTD ]Units Unit Cost Total Units Unit Cost Total Units Unit Cost TotalMar 1 60 $15.00 $9005 140 $15.50 $2,170 60 $15.00 $900140 $15.50 $2,17014 60 $15.00 $900 10 $15.50 $155130 $15.50 $2,01527 70 $16.00 $1,190 10 $15.50 $15570 $16.00 $1,12029 10 $15.50 $155 50 $16.00 $80020 $16.00 $32031 50 $16.00 $800SWOT ANALYSIS18
  19. 19. [COCA-COLA BEVERAGES PAKISTAN LTD ]The swot anlysis of the Perpetual Inventory System is as under:STREGTHS:Accurate Reporting• Companies often experience more accurate financial reporting with a perpetualinventory system. Accountants update the general ledger after each inventorytransaction. This results in a general ledger account that closely mirrors the actualphysical inventory on hand. Owners and managers can then make qualitydecisions based on the accuracy of reporting inventory values. Multiple inventorytypes also benefit from this method, as accountants accurately track each onethrough the general ledger.Electronic Management• Perpetual inventory systems often use electronic methods to record transactions.An example is the barcode system a clothing retailer uses when selling goods.Each scan records data that updates the companys inventory value. Accountantsuse this information to balance the general ledger. Companies also use the data toorder goods using a just-in-time system. Electronic ordering helps to preventstock outs and lost sales.WEAKNESSES:Cost• Many perpetual inventory systems are expensive. The cost for these systems istwofold. The technology necessary to make the system work can be a majorcapital expense. Updating the system for new changes to the technology is alsocostly. Training employees to properly use the system is yet another expense. Onthe administrative side, companies must find accountants who can work thesystem and manage frequent changes to the general ledger.Process• Perpetual inventory systems are often time-consuming. Electronic updates to acompanys general ledger may result in a need for account reconciliations.Accountants will often spend copious hours each week or month to reconcileinventory. Persistent errors can also cause further complications. Accountantsneed to correct errors and balance the inventory account prior to closing the19
  20. 20. [COCA-COLA BEVERAGES PAKISTAN LTD ]companys books. Reporting inaccurate inventory figures can trigger an audit,resulting in potential problems for the company.• Additional record-keeping Increase workload, increase in staff. Additional costsStaff costs, costs of computer package to maintain inventory records.OPPORTUNITIESAvailability of correct stock data- Correct stock data is readily available for settlement ofinsurance claims.Investment in materials kept under control - The investment in materials is kept at aminimum level as the actual stock is continuously compared with the maximum level andminimum level.Convenience and more demand from the business sector and from the organizations.THREATS(a) Loss of interest on capital locked up in stock.(b) Loss through deterioration.(c) Risk of obsolescence.(xi) Employment of specialised staff - Since the work is spread throughout year, wholetime specialised staff can be engaged for the purpose.(xii) Moral check on employees - The system acts as a moral check on the employeesworking in the stores which increases their efficiency.PRACTICAL STUDY OF THE ORGANIZATION20
  21. 21. [COCA-COLA BEVERAGES PAKISTAN LTD ]Current Organizational Hierarchy ChartAccounts system in CCBPLThe Coca Cola Beverages Pakistan has a centralized management structure in theorganization. The top most authority is the COCA COLA Corporate office at Lahore,where all the heads of respective departments are posted. Accounts are being headed bythe Chief Financial Officer, who is the in charge off major financial and accounts matters.At the territory units the officers in charge of the accounts and finance departments arecalled FINANCE LEADER. At lower level officers are called inventory controllers.Finance DepartmentFinance Department is responsible for proper flow of cash and for the controlling offinancial assets of the organization. The budget is allocated by TCCEC (The Coca-Cola Export Corporation) for the period of month or two and finance manager ofTCCEC of and on came there to check the financial activities.21
  22. 22. [COCA-COLA BEVERAGES PAKISTAN LTD ]Inventory Accounting PolicyInventories consist primarily of raw materials and packaging (which includes ingredients and supplies) andfinished goods (which include concentrates and syrups in Coca-Cola Companys concentrate operations,and finished beverages in finished product operations). Inventories are valued at the lower of cost ormarket. Coca-Cola Company determines cost on the basis of the average cost or first-in, first-out methods.Source: Coca-Cola Co., Annual Report22
  23. 23. [COCA-COLA BEVERAGES PAKISTAN LTD ]Inventory DisclosureCoca-Cola Co., Statement of Financial Position, InventoryUSD $ in millionsSource: Based on data from Coca-Cola Co. Annual ReportsItem Description The companyRaw materials andpackagingCarrying amount as of the balancesheet date of unprocessed items to beconsumed in the manufacturing orproduction process. Also includespurchased parts that will be used ascomponents of a finished product.Coca-Cola Co.s raw materials andpackaging increased from 2010 to2011 and from 2011 to 2012.Finished goods Carrying amount as of the balancesheet date of merchandise or goodsheld by the company that are readilyavailable for sale.Coca-Cola Co.s finished goodsincreased from 2010 to 2011 but thenslightly declined from 2011 to 2012.Inventories Carrying amount (lower of cost ormarket) as of the balance sheet date ofinventories less all valuation and otherallowances. Excludes non currentinventory balances (expected toremain on hand past one year or oneoperating cycle, if longer).Coca-Cola Co.s inventories increasedfrom 2010 to 2011 and from 2011 to2012.Dec 31, 2012 Dec 31, 2011 Dec 31, 2010 Dec 31, 2009 Dec 31, 2008Raw materials and packaging 1,773 1,680 1,425 1,366 1,19Finished goods 1,171 1,198 1,029 697 70Other 320 214 196 291 29Inventories 3,264 3,092 2,650 2,354 2,1823
  24. 24. [COCA-COLA BEVERAGES PAKISTAN LTD ]Double-entry under the perpetual methodBoughtgoods forcashCashpaymentsCheque (butt) Stock control DrCash at bank CrBoughtgoods oncreditCreditpurchasesInvoice (original) Stock control DrCreditors CrSold goodsfor cashCashreceiptsReceipt (copy) Cash at bank DrSales CrCost of sales DrStock control CrSold goodson creditCreditsalesInvoice (copy) Debtor DrSales CrCost of sales DrStock control CrThe COCA COLA BEVERAGES PAKISTAN is currently operating and using theFIFO (first in first out) method for its inventories in the accounts and financedepartments. However the actual information of the inventories can not be disclosed andprovided here as it is the company’s confidential matter.First-in-first-out stock valuation24
  25. 25. [COCA-COLA BEVERAGES PAKISTAN LTD ] Firms normally try to keep stock moving in Assumes that the first inventorypurchased is the first inventory sold. line with purchases dates to prevent old items from being shop-soiled, outdated.FIFO - ExamplePurchases SalesDate Lot No Qty UnitcostTotal Date Qty UnitSPJan 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 140FIFO – 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 87025
  26. 26. [COCA-COLA BEVERAGES PAKISTAN LTD ]Swot Analysis of Perpetual Inventory system in THE COCACOLA COMPANYWe have discussed the inventory system in the COCA COLA COMPANY, let us discussthe swot analysis of the topic very briefly:Strengths (internal) Weaknesses (internal)(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 accountingrecords.(6) Availability of correct stock data.(7) Easy to prepare interim accounts.(8) Slow-moving and fast-moving lines ofinventory can be identified.(1) Many perpetual inventory systems areexpensive.(2) Companies must find accountants who canwork the system and manage frequent changesto the general ledger.(3) Perpetual inventory systems are often time-consuming.(4) costs of computer package to maintaininventory records.Opportunities (external) Threats (external)1. New information technology tools canprovide quicker data sharing between CCBPLvarious units.2. More specializedpersonnels can be hired.3. Data can be accessed from every where ofthe world through the technology.4. Frequent updating of records and dataentries can be established.1. Risk of human error.2. Persistent errors can also cause furthercomplications.3. Reporting inaccurate inventory figures cantrigger an audit, resulting in potential problemsfor the company26
  27. 27. [COCA-COLA BEVERAGES PAKISTAN LTD ]CONCLUSIONWe have discussed our topic THE PERPETUALL INVENTROY SYSTEM in generaland with specific reference to the COCA COLA COMPANY. I tried to explain theperpetual inventory system, its nature and uses in the accounts and finance system ofbusiness and organization. Organizations like THE COCA COLA COMPANY havelarge volumes of business and so they require a system of accounts that can be accurateand prompt as well as easy to maintain and manage. However, it is the company’sdecision to adopt a suitable system for accounts and finance according to itsorganizational structure.27
  28. 28. [COCA-COLA BEVERAGES PAKISTAN LTD ]RECOMMENDATIONSWe discussed the perpetual inventory system in the COCA COLA COMPANY; we alsodiscussed the strengths, weaknesses, opportunities and threats of the workforcedemographics. Here are some recommendations for the improvement:1- A detailed and comprehensive data base must be established.2- All information should be included in the data base.3- Competent and qualified personnel should be hired for the accounts management.4- New advanced technology should be utilized for the accounts management.5- Untrained staff and inventory officers should be provided with trainings in newapproaches of inventory management and data processing.6- The organization must provide training opportunities to its workers and officers tominimize the factor of human error in data entry in inventories.DATA COLLECTION SOURCES AND REFERENCE:1- Web and internet2- Wikipedia3- Accounting Tools.(website)4- Preserve Articles.(website)28
  29. 29. [COCA-COLA BEVERAGES PAKISTAN LTD ]5- The Coca Cola Company, official website6- Staff and members of CCBPL, Sialkot & Gujranwala29