Inventory of assets and liabilities

Inventory allows an enterprise to document the actual availability, condition and assessment of its resources and liabilities. This is not just a recalculation of property, but an in-depth analysis of the correspondence of accounting data to the real state of affairs. The importance of inventory for any enterprise is difficult to overestimate, and its untimely conduct can even lead to financial losses. In the article below, we will examine how it is carried out and what documents are required for this.

Inventory of assets and liabilities: what is it and when is it used?

Inventory is a key tool for ensuring the reliability of accounting. It is a systematic check, during which the actual presence, condition, valuation of all assets and liabilities of the company are documented. It also provides for:

• first, identifying the actual presence of the relevant objects;
• second, identifying discrepancies (if any);
• third, determining compliance with the criteria of applicable national legislation.

Conducting an inventory of assets and liabilities is mandatory before preparing annual financial statements. It is applied to various objects, including fixed assets, assets, capital investments in progress, inventories, expenses, receivables and payables. To learn more, we recommend that you book a consultation with one of our professional accountants.

What are the features of inventorying assets and liabilities during martial law?

Despite the difficult conditions associated with the war, inventorying remains mandatory for all enterprises (except those located in temporarily occupied territories), although with some features. Below are the main ones:

• the director can independently conduct an inventory if he is the only employee on the staff;
• assets that were accounted for before the introduction of martial law, but are actually located in a temporarily occupied territory, must continue to be accounted for as part of the company's assets;
• vehicles transferred to the Armed Forces of Ukraine continue to be accounted for as part of fixed assets;
• the following criteria are applied for recognizing receivables as doubtful, such as the presence of the counterparty in territories where active hostilities are taking place, the absence of feedback, the financial insolvency of the counterparty caused by the war (the enterprise must also create a reserve for such debts).

The procedure for conducting an inventory of an enterprise's assets and liabilities: key aspects

When should it be conducted?

An inventory of assets and liabilities can be conducted before the annual balance sheet date (December 31), but with the following deadlines:

• within three months - for non-current assets, inventories, debts, liabilities;
• within two months - for unfinished capital investments, cash, liabilities in terms of unused provisions, settlements with the budget.

What is the procedure for conducting an inventory?

This procedure requires strict adherence to the requirements and looks like this:

1. formation of an inventory commission. This is carried out on the basis of an administrative document of the head of the enterprise, and the commission should include representatives of the management staff, accounting department, engineers, work performers and others who deal with the inventory;
2. preparation of inventory locations. This should be understood as ensuring order in warehouses and other premises to simplify the counting process;
3. transfer of primary documents to the accounting department, receipt of receipts for their delivery;
4. actual recalculation of assets and verification of liabilities;
5. entering data into inventory descriptions. Such documents are maintained according to established forms and have their own names depending on the object in question (for example, description of fixed assets, cash, etc.);
6. preparation of reconciliation statements. This is done only if certain discrepancies have been identified between accounting data and the real situation with assets and liabilities;
7. making necessary decisions by the manager (for example, on writing off shortages);
8. reflecting the results in financial statements.

Errors detected during inventory at the enterprise: how can they be changed?

To correctly resolve errors detected during inventory, it is worth using separate accounting entries. The main ones are listed below:

• posting of detected surpluses - Debit of accounts 10, 11, 12 and Credit of sub-accounts 7112 (7122));
• reflection of surplus non-financial assets - Debit of sub-accounts 1812, 1814, 1815, 1816 and Credit of accounts 7112 (7122);
• settlement of shortages - Debit of accounts 2115 (2125) and Credit of accounts 2211 (2221);
• write-off of fixed assets - Debit of accounts 8411 (8421) and Credit of accounts 10, 1116 and others.

To sum up, inventory is not just a formal procedure, but a key element of management. The law firm “Prikhodko & Partners” offers comprehensive accounting support for your business, within which you can receive consultation, preparation of inventory descriptions, making adjustments to accounting documents, support in resolving errors identified during the inventory, etc.

Our accountants will ensure the accuracy and transparency of your accounting, contributing to the effective inventory of assets and liabilities. To find out the cost of accounting support, fill out the form below.