Annual inventory - what is it for and what are the deadlines?

Inventory is the most effective way to learn about a company's assets. It is carried out not only because this is the duty of an entrepreneur engaged in commercial or production activities, but also for many other reasons. Among them are suspicions of irregularities, but also the liquidation of the business. One of the most important reasons, however, in addition to the obligation itself under the provisions of the Accounting Law, is to gain knowledge of the company's asset status. The data gained during a physical inventory provides the necessary knowledge to update the income and expense books, based on which the tax due to be paid is then calculated. There are many types of inventories. Annual, cyclical, periodic and others. Before deciding on a particular method, it is worthwhile to discern the law and the market, because nowadays you can choose from a number of companies engaged in inventory services. What is a continuous inventory? It is the opposite of one conducted randomly.

What is an annual inventory and what is it for?

The annual inventory is a series of activities aimed at summing up and counting all the company's assets functioning for the fiscal year, including manufactured goods, auxiliary materials, real estate, vehicles, equipment and machinery needed in the production process. It is carried out firstly because this is the duty of companies in the manufacturing and trading sectors, as well as those that keep a revenue and expense ledger. Based on the protocol derived from such annual inventory the ledger is updated, which is the basic accounting document of companies that account for themselves in this way. Annual inventory and income tax are concepts that are inseparable. Why is an annual inventory carried out?

Who must conduct the annual inventory?

It follows from the provisions of the Accounting Law, that the annual inventory should be carried out by every entrepreneur whose company accounts for its income and expense ledger. We are talking, first of all, about companies in the manufacturing and commercial sectors, but some service-type companies also have this obligation on them. It is primarily about such companies that, in order to create a service, must buy auxiliary materials. If the characteristics of such materials affect the final form of the service, then the company also has to conduct an annual inventory.  A good example of such a business could be, for example, a hair salon. Yes, it is possible to take care of the customer's hairstyle with the available tools themselves, such as scissors, but to carry out the entire service hairdressers still use various types of hair dyes, sprays, shampoos. And it is these that make it necessary for the owner of the company to annually introduce the annual inventory order.   This type of inventory is the basis for the correct calculation of the income tax due to be paid.

How to conduct an annual inventory?

The basic activity that should be undertaken at the beginning by the manager of a given unit obliged to carry out annual inventory is good preparation for this task. Already at the planning stage, it is good to pre-prepare all the documents that will make it easier to go through the entire process. Annual inventory forms should be clear, and thus not pose a great challenge for those who will be in charge of counting the assets. You can easily find annual inventory schedule templates to help you better plan your work. In preparation, it is a good idea to divide the company's assets into sections. Then make a precise division of tasks, specifying the manager who will ensure that the entire process is carried out correctly. This is an important moment, because on the knowledge and experience of such a person depends the efficiency of carrying out the entire process. Next, you need to choose the method of carrying out the inventory. The most popular way is physical inventory. A reliable accounting of all assets of the company. We are talking about manufactured materials, auxiliary materials, real estate or equipment and machinery. Then the results obtained are compared with accounting documents and information derived directly from the most up-to-date data. The template of the annual inventory order can be easily found on the Internet. This is actually an internal document that informs the initiation of the entire procedure. Another document is the final report, which is a direct supplement to the ledger.

By when is the annual inventory conducted?

The timing of the inventory annual is specified in the Accounting Law. The legislation specifies the earliest possible time to start the inventory, and this is three months before the end of the fiscal year. At that time, the entrepreneur can formally begin the physical inventory, as well as enter the information received on the ledger sheets. The legislator also sets an end date by which all inventory activity should be completed. This is the fifteenth day after the start of the new fiscal year. By that time, all procedures should be fulfilled, and the data from the final report should be in the ledger. This is important because on the basis of such data accounting calculates the income tax due to be paid.