In most business establishment physical inventories are taken. This is done at the close of accounting period or after the close of the business day or monthly. The process of taking a physical inventory requires that one physically count the actual number of units of each item in stock and record that number at the appropriate place in the inventory book. Once the quantities are determined for each item, total value also can be calculated for each. One of the principal difficulties with above procedure is determining unit cost of each item since all purchases are not made at the same time.
