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How to conduct a stocktaking process

Stocktaking - is an act of a physical counting process leading to the preparation of a detailed list of property assets and sources of their origin as of a specified date.

Stocktaking consists of the establishment by means of actual physical counting of all property, plant and equipment (fixed assets) and monetary assets; it also provides an explanation of a difference between actual balance established during the inventory and the balance resulting from books of accounts.

The main objective of a stocktaking process is to establish the actual balance of assets and liabilities. In particular it consists of:

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  • correlating entries in books of accounts with actual state
  • clearing accounts with people responsible for entrusted with them property items
  • assessing business usefulness of property items undergoing the inventory
  • counteracting irregularities having been stated during the inventory (surplus, useless items)
  • establishing proper financial outcome

Stocktaking concerns the following activities:

  • inventory through a physical counting of all the property items that remain at a business entity disposal
  • valuation of property items
  • obtaining written information from a business entity's contractors on:
    • financial assets deposited in bank accounts
    • granted loans
    • receivables and liabilities
    • the company’s own assets entrusted to contractors
  • comparing inventory records of some items (for instance land) with referential documents
  • establishing and explaining the causes of losses and discrepancies in quantities
  • proposing and substantiating motions concerning methods of settlement of inventory differences
  • indicating ways of removing irregularities in the management of a given entity's property

There can be named the following types of stocktaking:

  • Stocktaking through physical counting - performed by members of a stocktaking commission on the basis of direct observations and measurement of property items conducted in a given business entity. It comprises such accessible items as:
    • fixed assets
    • tangible current assets
    • cash at the entity’s cash desk
    • securities
  • Coordinating balance with contractors comprises mainly:
    • state of financial assets deposited in bank accounts
    • loans and credits
    • receivables
    • liabilities
  • Verification of records -concerns assets and liabilities the balance of which cannot be established through inventory or through the coordination of balance with contractors In particular it relates to:
    • arable lands
    • state or local authorities’ receivables and liabilities
    • other items impossible to access