Overview of the Inventory Management Process 453

products and their subsequent processing, the inventory system usually differs from one entity to the
next. You should concentrate on understanding the basic concepts of internal control.
The following topics related to the inventory management process are discussed:

Types of documents and records.

The major functions.
The key segregation of duties.
Types of Documents and Records
Table 131 lists the more important documents and records that are normally involved in the inventory LO2
system. Not all of these documents are presented in Figure 132. They are discussed here to give you
the information on documents and records that might exist in an inventory management process of a
manufacturing company. You should keep in mind that in an IT system some of these documents and
records may exist for only a short time or only in digital form.

Table 131 Documents and Records Included in the Inventory Management Process
Production schedule Production data information
Receiving report Cost accumulation and variance report
Materials requisition Inventory status report
Inventory master file Shipping order

Figure 132 Flowchart of the Inventory Management Process: EarthWear Clothiers

Production Management
Department Inventory Department IT Department
From human resource
From revenue From purchasing
management process
Prepare process process
production
schedule
Inventory Purchase Labour Inventory General ledger
Shipping Receiving
master file order distribution master file master file
order report
file file

Purchase Transfer General

Inventory
requisition goods to Input ledger
program
shipping program
department

(See Exhibit 131) Inventory

status
General
report
To purchase ledger
department
(see purchasing 1
process)
To General
1 Accounting

Inventory
status
report

Reviewed

eil43019_ch13_450-480.indd 453 04/10/13 12:40 PM