The said obligation is enforced in the Law on Financial Accounting of the Republic of Lithuania, indicating thereof that accounting data are based on the inventory data of assets and obligations, i.e. all accounting data should be checked.
The head of the enterprise shall be responsible for the organization and performance of inventory-taking in due time, inventory data retention, recovery of the deficits determined in the reconciliation statements and the final decision-taking. Meanwhile, the liability of the accounting manager is to register the inventory results correctly in the company’s accounting.
The new edition of the Inventory Rules (further the Rules) that were enforced from 1 January 2015 shall be used as a guide in the organization and performance of this year inventory and documentation of the results thereof. However, the above-mentioned rules foresee that the company with account taken of the Rules and the specificity of its own activities may determine the more detailed inventory procedure.
The timely initiation and planning of inventory, its performance and proper documentation of results are three essential factors leading to the successful performance of inventory and fulfillment of legitimate inventory obligations prior to preparing the annual financial statements.
1. Inventory initiation
At first the head of the company should decide and enforce in the form of an order who will be the members of the inventory commission and its chairman. Attention should be focused on the fact that the commission should be formed of no less than 2 people and their members cannot be the materially responsible persons. However, if the company employs less than 3 people, the commission may not be formed and the inventory may be performed by one person.
It is enforced in the new rules that the chief accountant cannot be appointed as the chairman of the commission and in the case of the lack in the qualified employees, the persons not employed at the company may be appointed as the members of the inventory commission.
The Inventory Rules also specify that the head of the company in his decision on the inventory organization should also indicate:
• The assignment to perform the inventory in due time and properly as at the state of the day referred to in the decision;
• Start and end dates of inventory performance;
• To document the inventory fact.
2. Inventory performance
The chairman of the inventory commission appointed by the head of the company shall familiarize the members of the inventory commission with the Rules, the inventory requirements and shall guide the performance of inventory.
The company must take inventory of all available assets and obligations. The main elements of assets and obligations of the company are described below:
• Long-term tangible assets. An inventory number, not to be changed, shall be given to each unit of long-term assets. During inventory, each unit of long-term assets or part thereof shall be reviewed and assessed whether the assets may be depreciated.
Assets possessing the signs of depreciation or found not to be included in the accounting shall be assessed at the market price. The assets may be assessed by the inventory commission or with the assistance of independent asset or business valuators in the event that the market price of the assets cannot be determined by the inventory commission.
• Long-term intangible assets. Inventory of the intangible assets shall be taken according to the respective accounting accounts. Inventory-taking is performed by checking the actual documents for acquisition of intangible assets and the available contracts.
In software inventory-taking, the actual documents for its acquisition and the available licensing agreements shall be checked, the actual amount of the software used, its conformity to the available acquisition documents and licensing agreements shall be identified.
• Stock. The materially responsible persons must participate in inspecting stock balances. In the case that they cannot participate, the replacing persons shall be assigned. During inventory, the assets shall be counted, weighed, measured and its amount identified by some other methods. The amount of packed packaging may be identified according to tags, upon random inspection of no less than 5% of such assets.
During inventory, the assets shall be issued and accepted only in the presence of the inventory commission. Inventory of the assets on transit and existing in other entities shall be taken by inspecting their forwarding documents.
• Cash. The materially responsible persons must participate in auditing cash balances. In the case that they cannot participate, the replacing persons shall be assigned. Cash on hand shall be calculated by their nominal value, and inventory of cash in bank shall be taken upon reconciliation of the accounting data with the bank data on the balances in accounts.
• Financial assets and liabilities. In taking inventory of financial assets and liabilities, terms and conditions of the contracts and documents, accompanying the changes in financial assets, shall be inspected.
The companies shall confirm the procedure of reconciliation of the receivables and payables, indicating thereof the amounts deemed to be immaterial and not to be reconciled by the company.
The initiators of reconciliation of the receivables should be their recipients. Where one of the reconciliation parties is the entity in the public sector, the reconciliation of mutual debts is documented by a reconciliation act, indicating thereof the amount, the reason of emergence and date; it is also determined whether the obligations are in progress.
3. Documentation of Inventory
To document inventory-taking, the companies prepare inventory records and other necessary registers. Inventory record is the document of inventory confirmation and execution. Inventory records are made according to the place of presence of assets, movement of assets during inventory-taking, materially responsible persons, grouping by bookkeeping accounts, contracts, and the facts of the existence of assets not fit for use determined during inventory-taking.
The mandatory details for inventory records are:
• Name of the company;
• Document name, place of its drafting;
• Inventory performance start and end dates;
• Names of assets and obligations as well as objects under inventory-taking ;
• Measurement indicators of the assets under inventory-taking;
• Amount and value of assets under inventory-taking;
• Number and amounts of receivables and liabilities under inventory-taking;
• Names and surnames of the inventory commission members, responsible and materially responsible persons, names of positions and signatures.
All the assets, checked and counted, shall be entered in the inventory record, indicating thereof the order number of their entry, name, type, amount, value, indicated in the accounting document, or just the value, or only the amount. In the inventory record the assets not fit for use shall be marked and the reasons for unfitness for use shall be indicated.
Errors in the inventory documents may be corrected only during inventory-taking. Corrections may be explained and signed by the persons who performed them.
One of the mandatory details in the inventory record is the signature of the materially responsible person, confirming thereof that he does not have any objections. In case the materially responsible person refuses to sign, he should explain in writing the reasons of refusal and sign the explanation.
On the basis of the inventory record, actual data shall be checked with the accounting data. Upon detecting discrepancies, the reconciliation statement shall be drafted. The inventory commission consisting of responsible persons shall require written explanations on the detected differences that must be submitted within the term determined by the commission. On the basis of explanations, the inventory commission determines the reasons of differences and recommends canceling the inventory and accounting data and provides proposals on the elimination of discrepancies.
The head of the company shall take the final decision on the registration of inventory in the accounting within the 15 working dates from the end of inventory-taking.
The staff of Leinonen wishes you the easy and fast inventory procedure!
