Inventory, i.e. physical inventory at the end of December
Entrepreneurs who keep a tax book of revenues and expenses are required to prepare a physical inventory at the end of the year, which in practice is also called an inventory or inventory. The rules and the method of its implementation are set out in the regulation on keeping the book of revenues and expenses. Check what is an inventory and how should it be properly included?
Inventory, i.e. a physical inventory
As it results directly from § 27 sec. 1 above of the regulation, taxpayers are required to prepare and enter in the inventory book:
- on January 1,
- at the end of each tax year,
- on the day of commencement of operations during the tax year,
- in the event of loss of the right to flat-rate income tax taxation during the tax year,
- in the event of a change of shareholder,
- in the event of a change in the proportion of shareholders' shares,
- at the time of liquidation of the business.
The inventory of nature is a summary of the actual amount of the following ingredients, i.e .:
- commercial goods,
- basic and auxiliary materials (raw materials),
- semi-finished products,
- work in progress,
- finished products,
- shortages and waste.
Assets included in the inventory must be appraised no later than 14 days from the date of its completion. The valuation of materials and commercial goods should be carried out according to the purchase or acquisition prices or market prices on the date of the inventory (if they are lower than the purchase or acquisition prices). In the case of the valuation of semi-finished and finished goods, the manufacturing cost is taken into account, while the deficiencies that have lost their original value are valued in the form of an estimate (in the context of further utility).
§ 29 clause 6 of the regulation on keeping the book of revenues and expenditures
The taxpayer is obliged to make the valuation at the latest within 14 days from the date of completion of the physical inventory. The entrepreneur, when drawing up the inventory, should also include goods that are the property of the taxpayer, but that are outside the enterprise on the date of the inventory, as well as foreign goods in his possession. The latter are not subject to valuation - it is only necessary to quantify them in the inventory with an indication of who they are owned. Taxpayers who are active VAT taxpayers evaluate goods that were eligible for a deduction of VAT as a net amount. However, if the taxpayer did not have the right to deduct VAT, then the valuation should be made in the gross amount.
Commercial goods purchased prior to commencement of operations
It often happens that entrepreneurs purchase commercial goods, which they then want to include in the KPiR before starting their business activity. Unfortunately, it is not possible to post previously purchased goods directly in costs. Entrepreneurs can only do this by compiling an initial inventory as at the start of operations and including these components. The components in the inventory should be valued according to:
- purchase price (net - if there is a right to deduct, gross - if there is no right to deduct),
- values on the date of the inventory (if it is lower than the purchase price).
Final and initial inventory
As mentioned earlier, the inventory must be prepared in order to close the tax year on December 31st. As a rule, they are not obliged to inform the head of the tax office about this fact, as in the case of the initial inventory. Additionally, if the taxpayer has made the inventory at the end of the year, he does not have to prepare it for January 1, because the final inventory will also be the initial inventory. Therefore, the state of components included in the physical inventory entered in the KPiR at the end of the year (i.e. on December 31) will also be the initial entry on January 1 of the following year.
On the other hand, taxpayers who started their business on January 1 are obliged to act differently, because they did not prepare a physical inventory at the end of the year, so their obligation will be to make an initial inventory. The obligation to prepare a physical inventory on January 1 of the tax year does not apply to taxpayers who have prepared a physical inventory at the end of the previous tax year. In this case, instead of the physical inventory for January 1 of the tax year, the book is entered with the physical inventory for December 31 of the previous tax year. From January 1, 2019, taxpayers taxed in the form of a lump sum were exempted from the obligation to prepare an inventory at the end of the tax year, which is confirmed by the Act amending certain acts to introduce simplifications for entrepreneurs in tax and economic law. Example 1.
Mr. Robert runs a sole proprietorship. On December 31, he prepared a final inventory and entered an entry in the revenue and expense ledger. In such a situation, is Mr. Robert obliged to make another physical inventory on 1 January?
No, as a rule, if the taxpayer has prepared an inventory at the end of the year, it will also be the initial inventory in the next tax year.
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Physical inventory items
The physical inventory should be carefully and permanently prepared, completed and signed with the signatures of the persons participating in the inventory. In § 28 sec. 2 of the Regulation on maintaining the KPiR, the data that should be included in the inventory have been specified in detail, including:
- name and surname of the plant owner (company name),
- date of the inventory,
- numbers of consecutive items of the physical inventory sheet,
- detailed description of the goods and other ingredients listed in par. 27,
- measurement units,
- the quantities found during the census,
- prices in PLN and grosze per measurement unit,
- values resulting from the multiplication of the quantity of the product by its unit price,
- total value of physical inventory.
At the end of the inventory, the clause "The inventory has been completed in position ...", signatures of the persons drawing up the inventory and the signature of the plant owner or partners.
Entering an inventory in the wFirma.pl system
Users of the wFirma.pl system, after making a physical inventory, can enter it using the tab: RECORDS »RETURNS» ADD REMANENT, where in the window that appears, select the type of inventory, i.e. FINAL, and enter the date and value. The value of the inventory will be included in column 15 of the Income and Expenditure Book.