Inventory in the accounting law

The concept of inventory is not, as it cannot be, alien to experienced entrepreneurs. The act of taking a physical inventory follows directly from the regulations of doing business. However, not every entrepreneur knows exactly what the inventory consists of or what is actually written in the Accounting Act document that organizes this issue. Most stocktaking, especially in companies employing more than a few people, engaged in trade and production, is carried out by professional companies or a trained, close-knit group of employees. What about the situation when we are just starting out in a business with an inventory obligation? Then many of us probably start looking for information on the basics - what doesthe Accounting Law sayabout inventory? What are the inventory deadlines in the Accounting Law? By when can it be carried out? What is included in this obligation? These and many other questions will be answered in the following study. What is inventory? Read and you will not make mistakes that can cost you dearly!

Inventory - regulations

The only legal document that organizes the issue of taking inventory in a company is the Accounting Act of September 29, 1994, otherwise known as the Polish Balance Sheet Law. So the original form of the document was enacted more than 26 years ago, but rest assured - the regulations are, in fact, constantly being amended and adapted to the current situation. Accounting offices are, of course, the best informed on the matter, since the constantly updated Official Gazette is the most important business document for an accountant.

Inventory in the Accounting Law appears several times, but the first mention is already in Article 4, paragraph 3, item 3. It speaks of the need to check or determine the actual state of assets and liabilities precisely by means of inventory. Thus, this is a very serious element that binds together the functioning of the business entity under the law.

Another and at the same time the most important passage of the Accounting Law in the context of inventory is the entire Article 26, the very first sentence of which states: "Entities shall carry out an inventory on the last day of each fiscal year..." Then the legislator precisely defines what is subject to inventory. The framework, definition and methods of inventorying the company's assets and financial components are specified.

From the content of the entire document, it is clear that the legislator envisages three basic methods of carrying out inventory. We are talking about a physical inventory, inventory by way of confirmation of balances, and inventory by way of verification. The most detailed results and, at the same time, the least risk of later consequences related to possible errors is given by physical inventory. This is simply a task that involves physically counting all the company's assets, that is, weighing and measuring, and then determining the value of a particular good that the company sells or produces. In addition, the activity must also include counting any real estate, movable property, as well as the balance in the company's accounts. Anything that can be determined by property. Slightly less accurate are the other two inventory methods, namely the verification of data from the books of accounts with the relevant documents, and the confirmation of balances with banks and contractors. Depending on the type of business and the type of assets (after all, they don't all have to be physically quantifiable), other types of inventory permitted by regulations are used.

The product of a properly conducted inventory is the physical inventory report. This document is an integral part of the financial statements prepared for the year. Based on the data contained in the latter document, the Fiscal Service calculates the appropriate amount of taxes to be paid. Mistakes at the stage of inventorying assets may have further consequences related to the incorrectly calculated tax base, which may constitute an offense and be subject to penalties, as may failure to conduct an inventory at all or being late with the deadlines specified by the law. Failure to comply with inventory obligations is sanctioned by Article 77 of the Accounting Law, which provides for a fine or even imprisonment for up to two years, both of which can occur together.

Inventory - deadlines

 The Accounting Law precisely defines the implementation dates. As a rule, it should take place on the last day of each fiscal year. However, due to the very large number of obligations imposed on the entrepreneur at the turn of the year, Polish regulations allow in special cases other inventory deadlines. And so, in these very special cases, the entrepreneur may start the inventory even three months before the end of the fiscal year, and finish it by the fifteenth day of the following year. This gives the company the opportunity to prepare in advance for an efficient inventory of assets. The inventory deadlines in the Accounting Law are therefore flexible, depending on the situation and the type of business. In special cases, the entrepreneur has the opportunity to postpone the deadlines, but each time this must be carefully justified. Otherwise, we expose ourselves to severe consequences, which, after all, we would all prefer to avoid.