Why would you perform a stock count procedure?

There are two reasons you might and should do it. Remember that stock count is not just for the ‘checkmark’, but for actually providing the company’s accounting and management with relevant information – accurate positions in stock and understanding whether there’s anything missing (that is there haven’t been any thefts) or if there’s something that’s actually long standing and if the net realisable value of such items has actually dropped below the currently recognized cost. 

One of the reasons why you’d perform for the stock count is to provide you with actual information regarding what you’ve spent in the production and what’s still standing in stock – this can be applied as ‘change in inventories’ on the income statement. It is okay to recognize all expenses incurred within the production as they occur, but it’s important to take those back from profit and loss into inventories based on actually standing stock at the end of the period. If for an example you’re just producing and on the other hand also selling without actually monitoring what’s moving out and what’s in stock at any given time. In such a situation you’d find it crucial to perform regular stock counts.

Another and a more general reason for performing a stock count is to at least once a year gain an understanding of whether there’s anything missing (i.e. there’s something on the list which doesn’t actually exist for an example). It’s also not for understanding if anything’s missing per say, but to also evaluate whether existing controls we have applied for monitoring inventory, for recognizing inventory related transactions, whether they are appropriate.