At the end of each year, taxpayers who keep tax books of revenues and expenses must prepare a physical inventory, commonly referred to as an inventory. An inventory is one of the activities that an entrepreneur must carry out in order to calculate the real income from business. Incorrect inventory means incorrectly determined income, and therefore also incorrect PIT. What exactly is an inventory? Who needs to do it?
What is an inventory?
Inventory, also known as inventory, is the determination (actual counting) of the amount of goods owned by the company that are intended for trading and have not been sold as at the date of the inventory. Such a statement should be made at the end of the year, which means that it should only include goods and materials that are in the company as at December 31st.
A physical inventory at the end of the year must be carried out by every company that uses the revenue and expense ledger and has assets specified in § 27 sec. 1 of the Regulation of the Minister of Finance of August 26, 2003 on keeping the tax book of revenues and expenses.
What’s in the inventory?
The scope that should be included in the inventory is specified in § 27 para. 1 of the Regulation on the operation of the KPiR and these are:
- commercial goods,
- basic and auxiliary materials (raw materials),
- blanks,
- productions in progress,
- finished products,
- shortage and waste.
How is an inventory document prepared?
When carrying out an inventory, we should include in it such data as:
- company owner data (name, surname),
- date of physical inventory counting,
- sheet item numbers,
- detailed name of the commodity and other ingredients included in the inventory,
- commodity measurement units,
- quantity of goods,
- item price per unit of measure,
- total value of the goods (quantity of goods multiplied by its unit price),
- total inventory count,
- clause “The inventory has ended on item (item number)”,
- signatures of the physical inventory participants and the signature of the company owner.
What is not included in the inventory?
The year-end physical inventory does not include:
- company equipment,
- fixed assets.
Inventory zero
Inventory is necessary for the correct calculation of the income value, it is directly imposed by the provisions on personal income tax. Even if the taxpayer does not have any commercial goods, materials or other items subject to the inventory, he should prepare a zero inventory. It is the entrepreneur’s declaration that as of December 31, the company has no inventory-required items, therefore it is subject to posting to the KPiR with a value equal to 0.
Year-end inventory to be valued appropriately
After the inventory is completed, all goods that are in it must be valued. Items are valued at the following values:
- commercial goods and materials – at purchase or acquisition prices or at market prices on the date of the inventory (if they are lower than the purchase or acquisition prices),
- goods whose production has not been completed – in line with the cost of production (cannot be lower than the cost of materials used for work in progress),
- finished products, semi-finished products and shortages – according to production costs,
- waste – according to the estimated value (including suitability for further use),
- livestock production – at market prices at the date of the inventory.
Entrepreneurs who are active VAT taxpayers evaluate the goods for which the right to deduct VAT was valued at net prices. In all other cases, the valuation should be made according to the gross value.
Please note that the plant should be closed during the inventory. During this time, it is not allowed to sell or buy new goods or products. The point is that the inventory should be prepared in accordance with the facts at the time of conducting this activity. Each purchase and sale transaction causes changes in the actual and documentary state.