Inventory is mandatory: cases, order, timing

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

Inventory is represented by a special procedure for reconciling existing values, goods, money or fixed assets of the company with those values that are available in the official documents of the enterprise. It can be carried out on a mandatory basis or at the initiative of the company's management. Conducting an inventory is mandatory for some companies, and this process is certainly carried out every year in all firms. The main purpose of this procedure is to identify various inconsistencies and shortages. Many firms do not realize the value of this process, so it is only used as a formality. Although if you correctly approach the inventory, then with its help you can identify all the shortages or surpluses.

Purpose of the process

Many aspiring entrepreneurs think about whether it is necessary to conduct an inventory and what goals can be achieved through this process. The procedure is represented by a systematic accounting of material assets and funds, for which a comparison of actualindicators with data from official documents.

The main purpose of the inventory is to identify discrepancies. They can appear for various reasons:

• values are affected by natural factors, so this includes shrinkage, deterioration due to improper storage, evaporation or loss occurring during the transport of goods;
• illegal actions on the part of company employees, for example, taking incorrect measurements, allowing body kits or even stealing valuables;
• problems that appear during accounting, therefore, after the inventory, various errors, corrections, inaccuracies, typos or other ambiguities in documents are often detected.

Based on this, a systematic audit allows any company manager to timely identify various violations and problems.

Verification functions

Conducting an inventory of goods necessarily involves the use of different functions of the procedure:

1. The conditions under which various goods are stored are objectively evaluated, and such an assessment is objective.
2. It is determined how correctly and competently the maintenance of various documents in the company is carried out.
3. Reflects the features of warehouse management in the company.
4. The completeness and correctness of accounting is assessed.
5. Prevention of various abuses and violations by hired specialists is granted.

Due to such numerous functions, holdingInventory is considered an important process in any company.

Cases of mandatory inventory count

Some companies are required to carry out the procedure without fail based on legal requirements. Information on in which cases an inventory is mandatory is contained in the following regulations:

• in Federal Law No. 402 “On Accounting”;
• in the guidelines approved by Order of the Ministry of Finance No. 49.

Certainly check is carried out in the following situations:

• when renting property;
• selling or buying back company-owned assets;
• transformation of a state or municipal enterprise;
• before the formation of annual accounts;
• when appointing a new financially responsible person in the company;
• when damage to valuables or theft of property is detected;
• after natural disasters or other emergencies;
• when the company is reorganized;
• before liquidation of the organization;
• in other situations provided for by law.

Inventory is mandatory before preparing annual reports. Such a process allows not only to take into account the requirements of the law, but also to prevent various errors or shortages in accounting papers. Typically, companies perform a review annually before the end of the calendar year.

Inventory of fixed assets is carried out every three years. Each manager should know all cases of mandatory inventory. Additionally, he can independently appoint an inspection if there are doubts about the honesty of the work of certain hired specialists.

How the process order is established

Carrying out an inventory necessarily involves taking into account the requirements contained in the Guidelines. Numerous nuances are determined by the direct managers of companies. For this, the rules are fixed in the constituent documentation.

The director of the company can identify some important points:

• when a process is required;
• how many times a year inventory can be done;
• at what time the process is carried out;
• how long does it last;
• what assets are sure to be checked;
• who is a member or chairman of the inventory committee.

The answers to all these questions are fixed in the founding documentation. Conducting an inventory is mandatory when changing financially responsible persons. Under such conditions, a new hired specialist can be sure that the shortages that arose under his predecessor will not be transferred to him in any way.

What is being checked?

Inventory can be carried out in relation to different property, so the verification of cash, fixed assets, materials or other items is highlighted. During the procedure, all assets and liabilities of the company and its subdivisions are assessed. The following elements are subject to verification:

• fixed assetsfirms used to conduct business;
• intangible assets of the company;
• various financial investments;
• goods and materials;
• work in progress;
• money in accounts and on hand;
• securities and SSOs;
• settlements with counterparties, buyers, the Federal Tax Service, various funds and other debtors or creditors;
• reserves;
• assets and liabilities of the enterprise.

When is an inventory of materials required? Such a check is performed when it is suspected that hired specialists in the company are abusing their powers, therefore theft or shortage is detected.

Verification is subjected not only to property owned by the company, but also to valuables that are located on off-balance accounts. The enterprise does not have ownership rights to them, but they are used in the process of work on the basis of a lease agreement or other agreements.

Process steps

Conducting an inventory of property necessarily involves the implementation of sequential actions. Therefore, the process is divided into stages:

1. An order is issued by the head about the need for an inventory.
2. An inventory commission is being convened, and it should include specialists who are not interested in the results of the audit.
3. Determine the time frame during which the procedure will be performed.
4. The property to be appraised is selected.
5. Materialresponsible persons of the company give receipts to the employer.
6. Print out inventories of values in the company, created for each financially responsible person.
7. A direct check is made, which consists in weighing, comparing the actual quantity with data from documents, measuring, counting and other similar actions.
8. The information from the inventory list is compared with the information available in the accounting documents, which makes it possible to identify any discrepancies
9. Comparison statements are being formed, with the help of which it is possible to identify the causes of discrepancies.
10. The results of the check are being drawn up, for which an appropriate act is being drawn up.
11. If shortages and other problems are identified, then an investigation is carried out in the company, the purpose of which is to identify the perpetrators.
12. Identified violators are subject to administrative or criminal liability, depending on the nature of the violations.

It is necessary to complete the inventory before the immediate preparation, signing and submission of annual reports to the Federal Tax Service. The inventory procedure necessarily ends with a special report.

Report Rules

A report is generated based on the results of the check. It includes the following information:

• inventory date;
• data on members of the inventory commission;
• period during which the procedure was performed;
• verifiable property of the company;
• Identified problems and shortages;
• signatures of all inspectors.

While inventory is required before annual accounts are prepared, any company executive can start the process without good reason. To do this, an appropriate order is issued, after which the employees of the enterprise are required to follow the procedure.

Responsibilities of the inventory commission

Inventory is required by law, so each company should create a special body responsible for checking and accounting. It is called the liquidation commission. She has some responsibilities:

• application of various preventive measures aimed at preserving the property of the enterprise;
• participation in various disputes related to the storage or damage of property values;
• control over the correctness of the preparation of various documents relating to the property of the company;
• inventory based on the order of the company's management;
• preparing a report on the results of the audit;
• conducting an investigation aimed at identifying the culprit of various violations and problems.

All these actions should be performed exclusively by employees of the firm who are not interested in the results of the audit.

Who is on the commission

When forming a commission, the following specialists are usually involved in the work:

• administrative workers;
• accounting department specialists;
• domesticauditors;
• often even independent experts are involved;
• representatives of various positions available in the staffing of the organization.

If the company has a small amount of different property, then often the responsibility for conducting an inventory is shifted to the audit commission, if it exists in the company.

If during the inspection it is revealed that even one member of the commission is absent, then the results of the procedure are invalidated.

Responsibility for non-inventory

Some business owners deliberately refuse to audit for various reasons. The legislation does not provide for liability for such a decision. But the Federal Tax Service can fine the company if it turns out that there are inconsistencies or errors in the received financial statements.

Recommendations from experts

When conducting an inventory in a company, it is advisable to use certain recommendations. These include the following:

• 10 days before the check, the head issues an appropriate order, which is recorded in the journal.
• It is allowed to form a commission not only permanent, but also one-time or working.
• If the organization uses a lot of goods and materials, then the decision on the need for a selective inventory is made by the manager based on the current situation in the company.
• All members of the commission should be involved in the verification, otherwise the results are easily recognizedinvalid.
• Responsible persons are involved during the process.
• The management of the firm must ensure that the process is carried out quickly and easily.
• Verification often takes a long time, especially in companies that use a large number of materials or ship and receive a lot of goods.

During the inventory, members of the commission must take into account the requirements of the law.

Due dates

The head of the company determines how often the check will be performed. But at the same time, certain recommendations are taken into account, therefore, an inventory is carried out at the warehouse at least once a year.

Stores must be checked twice a year. Materials and goods are evaluated without fail before drawing up annual reports. Verification is usually carried out within three days, but sometimes the process is delayed for several weeks.

Conclusion

Inventory is a mandatory process for any company. It involves comparing the available materials and goods with the quantity indicated in the company's documentation. The process is carried out by a special commission.

There is no information in the legislation on liability for refusal to conduct an inventory, but if tax inspectors find errors and violations in the reporting, the company will have to pay significant fines.