Stock Control In Manufacturing Company

Project and Seminar Material for Accountancy / Accounting

Project and Seminar Material for Accountancy / Accounting


The project is based on stock control in manufacturing company and was carried out to check the problem of how production profitability and liquidility problems that exist in manufacturing companies. The need for stock control cannot be overemphasized. The objective of this study is to know and control a proportional significant level of local asset so that they can be properly accounted for furthermore, to make recommendations for provident so that stocks can be properly accounted for into manufacturing companies. The materials used in this research work includes personal interview and observations questionnaires and the data’s are collected through analytical tools like chi-square, distribution tables, percentage and tables. However, along the line of carrying out the work, some limitation, were observed and they include the staffs, finance and time factor. The assets of the company can be tied down in a store months because of non-application of the modern development and controlling of stock but the application of an adequate stock control system will enable or business or an organization to avoid some avoidable cost in the cost of production. The stock control is aimed at ensuring that the valuation of a company is ascertained through knowing the total assets making sure there is loss due to ineffective cost control.

Chapter One


1.1 Background Of The Study

Stock is referred to as inventory. It includes stock of raw materials used for production, stock of finished good for resales, work-in-progress and consumerable stock items (oil and inebriant etc) which do not form part of finished goods. Inventories constitute the most significances party of current assets of manufacturing companies in Nigeria.

Stock control can be described as the system used in a company to control the company’s investment stock, stock control involves the recording and monitoring of stock control level forecasting further demand deciding when and how many to order.

The objective of an inventory or stock control system is to provide means of exercising close control over the flow of materials or goods into the warehouse and only preventing losses but also ensuring that adequate inventory level are in maintained.

Companies have various motives for maintaining stock, these motives can be grouped into the following:

  1. The precautionary motive
  2. The speculation motive
  3. Transaction motives.
i. The Precautionary Motive:

Companies also hold stock to guard against the risk of unpredictable change in demand and supply forces and other factors.

ii. The Speculative Motives:

The company stock order to take advantages of price fluctuations. The aim of management is to have reasonable quantities of materials in stock so that they can have a smooth and resale to maintained a minimum investment in inventories to maximize profitability.

These objectives gave an impact on the effective running of the organization. if large quantities of materials are maintained in the stock, substantial amount of fund is tiled down which it invested in a viable project could have generated some returns. The above problems in respect of controlling stock brought about the need to develop an effective and efficient stock control system in a manufacturing company. There are techniques for proper controlling of stock and they have of grate help to many organizations, especially manufacturing companies which has to deal with large quantities of stock or raw materials.

iii. The Transaction Motives:

Companies also hold stock to guard against the risk of unpredictable change demand and supply forces and other factors.

Brief history of international textile industries Nigeria limited (a member of the church gate ground)

The manufacturing textile industries was established in the late’s 6o’s (sixties) as a subsidiary company under church gate Nigeria limited (the parent of many companies).

This manufacturing company was establishes for the aim of guiding the implementation of indeginisation of the economy.

The activities of this company include, yarn spinning for exportation manufacturing and exporting of woven, processed and printed fabrics and ginning e.t.c.

They company’s get it’s raw materials form internal and external source. Some of the internal source i.e (local companies) that I.T.I get’s materials from are namely.

  1. GLOBE SPINNER MILS PLC (A member of the church gate group)
  2. FIRST SPINNERS PLC (A members of the church gate groups)

While the external source converses includes


Their policy is to produce quality textile fabrics made up of polyester, blends, cotton and worsted as per the stated and implied need for domestic and overseas customers.

  1. To create employment opportunities for more Nigerians.
  2. To promote industrial development in Nigeria
  3. To provide goods and service to the people.
Statement Of Accounting Policies Of The International Textiles Industries (ITI).

The financial statement of the company prepared under the history cost convention modified by the inclusion of freehold and leasehold properties and professional valuation.

Fixed Assets.

Land and building are stated at their professional valuation with subsequent addition at cost less accumulated depreciation. Other fixed assets are started at cost less accumulated depreciation.

Definition Of Fixed Assets.

Depreciation is changed on a straight-line basis at the following annual rates which are expected to write off the cost of revaluated amount of the assets over their anticipated useful live.

Preload land NIL

Building 20 (of cost price)

Leasehold – over 50 year 12%

Under 50 years the period off lease

Plant and machinery 20%

Furniture and fittings 5%

Motor vehicle 10%

Long Term Investments

Investments are stated at cost


Debtors are stated after deduction of specific provision for any considered doubtful for recovery.


Turnover represents the net invoice of sales to external customers.


Stock are stated at the lower of cost and net reliable after making provisions for obsoleted and demand items.

Deferred Taxation

Provision is made respect of:

  1. The estimated income tax and capital gains fixed liabilities which would arise where the fixed assets to be realized at their book values, at the balance date and
  2. Other timing deferential.

1.2 Statement Of Problems

The amount of stock available to any manufacturing company to a great extent determines its ability to meet its production target. The control of these stocks needs to be given attention. The problems faced by the management of international Textile Nigeria, affects or hinder smooth production which results in its ability to give maximum services to customers.

In the context of inventory control, the company is faced with the problems of meeting conflicting needs.

  1. To maintain adequate investment in stock to achieve profitable operation.
  2. To maintain adequate inventory and smooth production and sales production. In addition to the above problems.
  3. It is difficult to determine how much to order when an order is to be placed.
  4. It is also difficult to determine when inventory is to be re-ordered.

1.3 Objective Of The Study

Since stock make up a significant proportion of total assets, it is essential that stock are properly accounted for and safeguarded in a stock department. The main objective of this research work is to:

  1. Make recommendation improvement so that stock can be properly accounted for and safeguarded.
  2. To highlight to the management of this company those area like issuing and receipt of stock which need to be improved in order to exercise a reasonable control over the company’s stock.

1.4 Hypothesis Of The Study

In relation to the problem mentioned above, the following are the working hypothesis underlying this research work.

  1. That holding large quantities, of inventory increase warehouse cost, handing cost and insurance cost.
  2. That “the effective control of inventory leads to reduction in holding cost and consequently increases profitability.
  3. That “the holding of sufficient quantity of finished goods enhances smooth sales operation.

1.5 Research Question

This research work was carried out to identify the importance of stock control in manufacturing companies.

This research questions are:

  1. Why is it important to control stock in manufacturing industries?
  2. How effective is stock control in prevention and detecting fraud?
  3. Do inventory form a significant proportion of company’s assets?
  4. Does the holding of qualities of inventory increase warehouse cost, handing cost and insurance cost.

1.6 Significance Of The Study

The main objective of stock control system is to have enough stock in hand for uninterrupted production and smooth sales. This may not always be the case where supply or demand fluctuated and there might be a risk of running out of stock.

This significance of this research when completed can not be oven emphasized since it will clearly reveal to the management of international textile industries, the adequate or otherwise of the techniques that being applied in controlling the company stock.

The adequacy or otherwise of the stock king, valuing stock, issuing and receipt of stock will be revealed to the management which will eventually assist management decision to take corrective action in respect of stock control. The research will be very useful in minimizing carrying out by avoiding excessive stock holding. The project will be of great use to accounting/accountancy students and stock controls of various manufacturing companies.

1.7 Scope Of The Study

The subject of interest which stock control can offer for research are varied which is why this project will not go deep into everything about stock control

To give this research work a better understanding of problem of stock control of manufacturing companies, international Textile Industries Nigeria Ltd, plot 10, Block3, Isolo Industries Estate, P.O. Box 2604 marina, Lagos Inventory management technique that is applied by the company is covered in this research paper. A method of valuing stock, stock taking issuing and receipt of stock of this company’s is covered in this research paper.

Method of valuing stocking, issuing and receipt of stock of this company are not untouched, adequately or otherwise of the technique method are also fully covered. The research work also include finding and recommendation as regards to management of stock.

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