Stocktaking, or Inventory – What You Need to Know at the End of the Year

The end of the calendar year is not only a time for business summaries but also for taking care of essential formalities. One of the key obligations entrepreneurs must not forget is stocktaking, also known as inventory. What exactly is stocktaking, who is required to conduct it, and how to do it correctly? This article will address these questions.

What is Stocktaking?

Stocktaking, or inventory, is the process in which an entrepreneur lists all the goods, materials, raw materials, or semi-finished products they have at a specific moment. This records the actual state of the company’s assets as of a date specified by law—typically December 31.

Inventory is not only a legal requirement but also a tool that helps assess the current financial condition of the company. It allows you to identify surpluses, shortages, and potential irregularities in inventory management.

Who is Required to Conduct Stocktaking?

Stocktaking is mandatory for all entrepreneurs maintaining a revenue and expense ledger (KPiR). It primarily applies to:

• Trading companies engaged in selling goods,
• Manufacturing companies using materials and raw materials,
• Certain service providers, if they utilize raw materials or semi-finished products in their operations.

If you use simplified accounting or a lump-sum tax system, stocktaking may not apply to you. However, it is advisable to confirm this based on your individual tax situation.

What Does Stocktaking Include?

To ensure the inventory is complete and complies with legal requirements, it should cover the following elements:

• Trade goods – Products intended for sale, located in the warehouse, store, or other locations.
• Materials – Raw materials and semi-finished products used in production.
• Finished products – Manufactured goods ready for sale or delivery to customers.
• Shortages and waste – Damaged, expired, or substandard items requiring separate documentation.
• Work-in-progress – Components and elements still in the production process.
• Unfinished works – Ongoing production in service or construction activities.
• Auxiliary materials – Items not directly used in production but supporting it (e.g., cleaning agents).

Each category should be recorded in a physical inventory list and subsequently valued according to applicable rules.

What Data Should Be Included in the Physical Inventory List?

A properly executed inventory list must include the following information:

1. Date and location – When and where the stocktaking was conducted.
2. Item number – Each entry should be numbered for easy reference.
3. Item description – A detailed identification of the item (e.g., trade or technical name).
4. Unit of measure – The unit used to count the item (e.g., pieces, kilograms, liters).
5. Actual quantity – The actual amount of items at the time of stocktaking.
6. Unit price – The cost per unit in the relevant currency, based on purchase price or production cost.
7. Total value – The quantity multiplied by the unit price, indicating the total value of the entry.
8. Comments – Space for additional details, such as technical condition or expiry dates.
9. Signatures – The signatures of the person conducting the inventory and the supervisor, verifying the accuracy of the data.

How to Prepare for Stocktaking?

Proper organization is key to conducting an efficient and accurate inventory. Here are some steps to consider:

• Gather necessary documents: Prepare warehouse lists, purchase documents, invoices, and lists of goods and materials.
• Assign responsibilities: In larger companies, designate individuals responsible for specific warehouse areas or documentation.
• Label items: Ensure all inventory items are clearly marked to facilitate counting.
• Prepare inventory sheets: Include columns for item name, unit of measure, quantity, and unit value.
• Plan the timing: Conduct the inventory after completing operational activities for the year (e.g., after store closure).

How to Conduct Stocktaking Correctly?

The stocktaking process can be divided into several stages:

1. Counting inventory: List all goods, materials, and other resources. Pay attention to quantity and quality, noting damaged or expired items.
2. Valuation: Assign a value to each item using purchase prices or production costs (complete valuation within 14 days of inventory completion).
3. Drafting the inventory list: Document the inventory results in the physical inventory sheet, ensuring it includes the required details and signatures.
4. Recording in KPiR: The value of the final inventory must be entered in the revenue and expense ledger as of December 31.

Common Mistakes During Stocktaking

Be mindful of common errors that may occur during inventory:

• Incomplete data: Omitting items from the list.
• Incorrect valuation: Assigning improper values to items.
• Incorrect dates: Recording inventory on a date other than December 31.
• Missing signatures: Failing to have the document signed by responsible individuals.

Why is Stocktaking Important?

Stocktaking is not only about meeting tax requirements but also a tool for better company management. It helps assess inventory levels, identify surpluses and shortages, and start the new year with a clear financial picture.

By conducting a proper inventory, you’ll gain peace of mind and a solid foundation for making informed business decisions.

If you need assistance with stocktaking or have questions about other end-of-year accounting obligations, contact our accounting office. We’re happy to help!

Stay updated with the latest accounting changes by following our blog, where we regularly publish practical tips for entrepreneurs. Need personalized support? Visit our accounting office in Kielce, where our experts can assist with financial management and accounting needs, ensuring reliability and peace of mind in every aspect of your business operations.