Inventory management and annual inventory
Inventory management is an important activity for most companies, but a critical and indispensable activity for companies in the retail sector. Lack of inventory management can create financial problems within a company.
Differences: Inventory management differs from one company to another depending on several factors, such as: the field of activity, the degree of perishability of the goods sold by the company, the duration of the manufacturing cycle, the time period in which the supply can be made, etc.
Similarities: The operating cycle of the companies includes the same phases, namely the supply of raw materials, internal production and sale/delivery to the company's consumers/customers.
Stock is the amount of goods that are used for production or further sale. The purpose of inventory management is the clearly defined rules and procedures that must be followed and respected, so that there is a minimization of costs while increasing efficiency and satisfying customer needs through increased sales.
The stock category includes:
- stocks of raw materials and materials (class 30);
- stocks in progress (class 32);
- production in progress (class 33);
- products (class 34);
- stocks held by third parties (class 35);
- goods (class 37);
- packaging (class 38);
- adjustments for impairment of inventories and work in progress (class 39).
In order to draw up the annual financial statements, the stock inventory is required, which consists of the analysis of the physical stocks entered in the warehouse records and the written balances from the accounting, the identification of the differences following the inventory (plus/minus to the inventory) and the adjustment as necessary.
The inventory is carried out according to the rules regarding the organization and performance of the inventory of assets, liabilities and equity elements from 09.10.2009, approved by Order of the Ministry of Public Finance no. 2861/2009.
Responsibility for the good organization of inventory works, according to the provisions of Law no. 82/1991, republished, and in accordance with the applicable accounting regulations, rests with the administrator, the credit orderer or another person who has the obligation to manage the entity. In order to carry out the inventory, these persons approve written procedures, adapted to the specifics of the activity, which they transmit to the inventory commissions.
Before starting the inventory operation, the inventory commission must request a written statement from the manager.
All the goods that are inventoried are registered in the inventory lists, which must be drawn up by work points, storage places, sections, workshops, workplaces, by managers and categories of goods with the respective characteristics - name (symbol, number of code), inventory number, unit of measure that must be identical to the accounting one, as well as any other characteristic that facilitates the identification of the respective goods.
If the commission finds pluses, minuses, degradations, declared or undeclared before the start of the inventory, it will ask the responsible managers for written explanations regarding their causes and will verify the reality of the manager's assertions, being able to request for this purpose relationships and documents from any person from within society.
In the situation where surpluses are found in management for stocks, the respective goods are evaluated and recorded in accounting at their acquisition cost. In the situation where management surpluses are found for tangible and intangible assets, they are accounted for in the investment subsidy accounts.
If we have a situation where goods are found to be missing after the inventory, they are evaluated and recorded in the accounting records at their accounting value (acquisition cost).
There may be situations when the pluses and minuses found in the inventory can be compensated, but this can only be possible if the following conditions are met:
– there is a risk of confusion between the sorts of the same good material, due to the similarity in terms of external appearance: color, design, model, dimensions, packaging or other elements;
- the differences found in plus or minus refer to the same management period and the same management. Compensation is made for equal amounts between the identified surpluses and shortages.
According to the law, compensation is not allowed in cases where it has been proven that the shortages found in the inventory come from the theft or degradation of the respective goods due to the fault of the persons responsible for the management of these goods.
The results of the inventory are recorded by the inventory committee in an inventory report, which is a supporting document that forms the basis of the accounting records, along with the written decision to appoint the commissions and the inventory lists.
Material made by:
Laura Chirica
CECCAR – Accounting Manager, Finconta Properties
Over 16 years of experience in accounting & payroll, consulting, restructuring & reorganization transactions and due diligence.
