For a business to be successful and profitable, it must be managed competently, with knowledge of numerous nuances—such as what inventory is, why it’s necessary, and in what cases it’s required. A company must understand what assets it has on its balance sheet, as this helps build the right sales model and relationships with partners and competitors. According to Russian legislation, legal entities must conduct inventory strictly within specified intervals. For some assets, the timeframe is one year; for others, three years; and for some, even five.
What Is Inventory for a Business?
The term inventory refers to the recounting of all a company’s assets, followed by a reconciliation of actual property with the data recorded in accounting. This procedure helps promptly identify shortages, theft, and provides insight into whether the business is being managed correctly.
Inventory is needed to:
- Know the quantity of goods in stock. Based on this information, priority procurement or production tasks are determined, helping to accurately calculate expenses and profits.
- Identify products without barcodes—those considered lost or spoiled, i.e., items that need to be written off.
- Reassign responsibility for material assets to another person, such as when a warehouse worker resigns, goes on sick leave, or takes vacation.
- Prepare the company for inspections by authorities that monitor financial flows.
Regular inventory also prevents theft within the company—employees know that any fraud will be uncovered during the next audit.
What Is Subject to Inventory?
As of April 1, 2025, a new federal accounting standard (FAS No. 28/2023 “Inventory”) has been approved at the state level. Its provisions apply not only to legal entities but also to individual entrepreneurs maintaining accounting records. Previously, inventory was conducted based on methodological guidelines from Order No. 49 (1995) and provisions of Order No. 34 (1998).
According to these documents, the procedure involves checking:
- Intangible assets, such as patents, trademarks, and software.
- Company-owned property—equipment and real estate valued at 100,000 rubles or more.
- Financial assets and monetary documents.
- Financial investments—securities, stocks.
- Inventory and materials, including raw materials, finished goods, components, merchandise for sale, and fuel.
- Reserve funds, which are necessary for any company to cover vacations, bonuses, repairs, and emergency situations.
Inventory also includes checking work-in-progress—goods in the manufacturing stage. Additionally, it assesses accounts receivable and the company’s debts, liabilities, and loans.
Types of Inventory
Inventory differs by purpose, scope, coverage, and execution methods. It can be initiated by the company’s management, external regulatory bodies, or a department head.
By purpose, inventory is divided into:
- Scheduled. The timeline is approved by management at the beginning of the year, typically planned for November-December—the end of the reporting period.
- Unscheduled. Conducted when there’s a change in the materially responsible person or suspicions of theft. It’s also required after utility failures, fires, or other emergencies.
- Repeat. Necessary if there are justified doubts about the data obtained during scheduled or unscheduled inventory.
- Control. Organized after scheduled inventory to verify the accuracy of material asset recounts.
By scope, inventory can be full or partial. The former involves auditing everything on the company’s balance sheet—raw materials, goods, supplies, and financial assets—and is required for annual reporting. Partial inventory may cover only one department, such as a warehouse.
Asset accounting is also divided into mandatory and voluntary. The former is conducted per legal requirements, while the latter is initiated by an authorized person.
Inventory is carried out in three stages. The preparation stage involves the manager issuing an order, forming a commission, and setting deadlines. During the main stage, all tangible and intangible assets are verified through counting, weighing, and document review, with inventory lists being compiled and reconciliation statements prepared if discrepancies are found. At the final stage, based on these documents, the manager issues an order approving the results.
Accountants and materially responsible persons must be well-versed in inventory procedures, as they affect the accuracy of accounting and financial reporting. Compliance with inventory rules for goods, materials, and finances helps avoid undesirable situations, including bankruptcy.
