Discuss stock verification and recognition. Point-wise: - Stock verification is the process of physically counting and verifying the inventory or stock available in a company or business. - It helps

to ensure that the physical stock matches the stock records in the company's inventory management system.
- Stock verification is important for businesses to prevent theft, fraud, and errors in inventory management.
- It also helps in identifying any discrepancies between the physical stock and the stock records, allowing for timely correction of any issues.
- Stock verification is typically conducted periodically, such as monthly, quarterly, or annually, depending on the size and nature of the business.
- The process of stock verification involves counting and recording the quantity of each item in stock, comparing it with the stock records, and investigating any discrepancies.
- Stock recognition, on the other hand, refers to the process of recognizing and recording the value of the stock in the company's financial statements.
- Stock recognition is important for accurately reflecting the value of the company's inventory in its financial reports and statements.
- Proper stock recognition ensures that the company's financial statements provide a true and fair view of the company's financial position.
- Stock recognition involves valuing the stock at cost or market value, depending on accounting standards and company policies.
- Both stock verification and recognition are essential processes for businesses to maintain accurate inventory records and financial reporting.

Stock Verification and Recognition:

Stock Verification
- Process of physically counting and verifying the inventory or stock available in a company or business.
- Helps reconcile theoretical and actual stock levels, ensuring accuracy in inventory records.

Recognition
- Accounting practice of recognizing a stock adjustment in the financial statements when there is a difference between theoretical and actual stock levels.
- Two types:
- Gain on Stock Adjustment: When actual stock exceeds theoretical stock, resulting in additional inventory value being recognized.
- Loss on Stock Adjustment: When actual stock falls below theoretical stock, resulting in a decrease in inventory value being recognized.

Importance of Stock Verification
- Maintains accurate inventory records, crucial for planning, budgeting, and decision-making.
- Prevents discrepancies between physical inventory and accounting records.
- Detects potential theft, shrinkage, or damage to inventory.
- Enhances inventory management efficiency by identifying areas for improvement.

Procedure for Stock Verification
- Establish a clear counting plan and assign responsibilities.
- Physically count all inventory items on a specific date.
- Reconcile the physical count with theoretical stock levels.
- Document any discrepancies or adjustments.
- Investigate and resolve any significant discrepancies.

Accounting Treatment
- Stock Discrepancy Adjustment:
- Record the difference between physical count and theoretical stock as either a gain or loss.
- Disposal of Obsolete or Damaged Stock:
- Adjust inventory value to remove obsolete or damaged items, which may result in a loss.
- Rollback of Sales:
- Recognize negative inventory balances as rollback sales, reversing revenue previously recorded for items not in stock.