Book inventory is the cost of inventory on hand, as stated in an organization's accounting records. This amount is compared to the actual inventory on hand to see if there are any discrepancies in the accounting records, which can indicate procedural or control problems that should be corrected.
Differences between book inventory and actual inventory can have a number of causes, including the following:
- The theft of inventory
- Inventory receipts that were not recorded in the accounting records
- Inventory sales that were not recorded in the accounting records
- Inventory that has been recorded using the wrong unit of measure
- Inventory that has been recorded using the wrong part number
- Inventory that was sent out on consignment, and removed from the accounting records