JUNIOR CYCLE BUSINESS STUDIES Income statement 1 entry order A
Go to page 175 of your Activities and Accounts Book to rearrange the information in income statement 1 in the correct order.
Preparing income statement 1 A
Go to page 176 of your Activities and Accounts Book to practise preparing income statement 1.
STOCK CONTROL
Stock control means having enough of the right stock to meet customers’ needs, while avoiding the cost of having too much stock.
Being overstocked (having too much stock) or understocked (having too little stock) can cause problems for a business, as outlined in the following table.
Overstocked
We will learn more about stock turnover in chapter 28
GO
• The stock may go out of date or out of fashion (e.g. a supermarket holding too much dairy produce will lose money if it goes out of date before it is sold)
• Cash that is tied up in overstock could have been left in the bank to earn interest or used elsewhere (e.g. a toy shop may have a warehouse full of stock and not enough money to run the business)
• There is an increased risk of damage the longer the stock remains in the warehouse or on the shop floor
• High stock levels may mean increased insurance and security costs
The most efficient level of stock for a business is called the optimum level. Holding the optimum level of stock will avoid the costs involved with being overstocked or understocked.
Understocked
• Sales will be lost to competitors if stock is not available for customers to buy
• The business may get a reputation for being badly stocked and for letting customers down
• The business may be paying rent on unused warehouse space
