The University of Tennessee, Knoxville

Tennessee County Municipal Advisory Service

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Physical Inventory

Reference Number: MTAS-639
Tennessee Code Annotated
Reviewed Date: September 11, 2017
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To ensure that the system is functioning as intended, the city should initially take a complete inventory of capital assets every three or four months. The inventory should agree with the records maintained in the CAAS.

After determining that the system is operating properly, an annual physical inventory (coinciding with the end of the city’s fiscal year) should be sufficient. In the interest of internal control, the property accounting officer should check inventories randomly and unannounced.

We recommend that you require strict accountability for the use and care of capital assets. Make an investigation of any shortages or overages in cooperation with the department involved.

Frequently such conditions are due to the lag in recording acquisitions, transfers, and dispositions. Report any unexplained shortage to the head administrative or chief fiscal officer. Make adequate written explanation of all items accounted for and be available for any administrative or legislative inquiry regarding discrepancies.

It will simplify taking inventories if the property accounting officer provides a current listing, in numerical order, of the equipment charged to each department. This list should provide space for checking each item present, noting exceptions and certification.