Inventory of Assets and Liabilities and Their Valuation

Inventory of assets and liabilities is an inherent element of the bookkeeping process that ensures reliability and compliance of the data in the accounting books with the actual financial status of the entity.

According to the Polish Accounting Act and the decisions of the Standard Committee, every economic entity, regardless of its size or legal form, must carry out inventory at least once a year.

What is inventory of assets and liabilities?

The main objective of inventory is to confirm the existence, status and value of the entity’s assets and to compare them with the date in the accounting books. This allows detecting any inventory discrepancies due to errors, incidents or other reasons. In case of entities that are obligated to audit financial statement, it is necessary to inform the auditor about the deadlines of the inventory in advance because supervision over the physical stock check is one of the most important parts of the audit.

Responsibility for the inventory

The organization and supervision over the inventory process must be carried out by the head of the entity. In this function is served by a collective body, the responsibility is imposed on all its members. The head of the entity must specify the deadlines and the schedule for the inventory in the accounting policy or inventory instructions, adjusting it to the specific nature of the entity and the type of assets. The head of the entity is responsible, among others, for appointing the inventory commission, issuing orders regarding preparation of the check, supervising the inventory process, and for the reconciliation of its results.

Inventory methods

The Polish Accounting Act (Art. 26) distinguishes three main methods of inventory:

1. Physical stock check – which involves counting, weighing and measuring assets, valuating them and comparing with the details in the accounting books. The surplus or shortages must be properly reconciliated and recognized in the books.
2. Balance confirmation – reconciliation of cash balances with banks and receivables with contractors. This method involves collecting information on the status of accounts and settlements from external institutions.
3. Verification – used when it is impossible to carry out a physical stock check or obtain a balance confirmation. The verification involves comparing data in the books with the documentation and verifying the correctness of the presented balances. Results of the verification must be documented in a report.

Inventory deadlines

Basically, the inventory is carried out at the end of the financial year but it can already be started up to 3 months before the end of the year and completed up to 15 days after the balance sheet date. The said deadlines do not refer to monetary assets, securities, work in progress and certain materials and goods that must be subjected to inventory precisely at the end of the year.

Frequency of inventory:

• Once a year – among others, monetary assets, materials and goods in an unguarded area.
• Every two years – inventories in a guarded area.
• Every four years – real estate and tangible assets in a guarded area.

Documenting the inventory

The results of the physical stock check are documented in inventory sheets. The sheets must be completed clearly, with no free space left. In case of identified inventory discrepancies, they must be settled and presented in the accounting books. Verification of the balances is documented in a report while the balance reconciliation is confirmed by written statements of the contractors.

author: Piotr Czarnecki, Junior Reporting Specialist, MDDP Outsourcing Warsaw

We invite you to read the remaining articles in the ‘Financial Report 2025’ series:

1. Schedule of Works on the Financial Statement: The Key to Effective Reporting
2. Determining the Form of Financial Reporting: Key Aspects
3. Audit Obligation and Selecting the Auditing Company: Key Aspects
4. Inventory of Assets and Liabilities and Their Valuation
5. Valuation of Assets and Liabilities on the Balance Sheet Date
6. Preparation and Signing of the Annual Financial Statement: A Step-by-Step Guide
7. Consolidation of Financial Statements: Key Rules and Requirements
8. E-Statements: A Guide to Electronic Reporting of Financial Statements
9. Sending a Financial Statement After the Deadline: Consequences and Procedures

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