What is the purpose of accounting software?

• Accounting and Taxes
  • Accountant Selection
  • Accounting Software
  • Bookkeeping
  • VAT
  • Legislation and Accounting
  • Accounting Balance Sheet
  • Auxiliary Accounting
  • Stock Valuation
  • Merchant’s Accounting Books

• BtoB Invoicing
  • Invoicing Software
  • Legal Mentions on an Invoice
  • Collections
  • Restart an Invoice
  • Formal Notice, Invoice Payment

• Payments
  • Payment Methods
  • Payment Vouchers
  • Assets
  • Provisional Deposits
  • Refunds
  • Electronic Invoicing
  • Cash Voucher: Legal Mentions

• Manage Your Store
  • Checklist Before Opening Your Store
  • Opening Hours
  • Point of Sale Organization
  • Start Your Day
  • Close Your Day

• Safety and Hygiene in Your Store
  • Hygiene Rules
  • Safety Rules
  • Video Surveillance Systems

• Stock Management
  • Risks of Poor Stock Management
  • Management of Stock Exits
  • Avoid Dormant Stocks
  • Storage Rules
  • Stock Management for E-commerce
  • 360° Vision of Your Business
  • Avoid Stockouts
  • Purchase Management
  • Product Stock
  • Unsold Goods
  • Logistics

Inventory
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• What is the Purpose of Inventory?
• Types of Inventories
• Inventory Tools
• Conduct Your

inventory

• Prepare Your Inventory
• Checkout Stock
• Inventory and Accounting
• Inventory and Legislation
• Inventory Process
• Inventory and Capital Inventory
• Physical Inventory
• Annual Inventory and Deadline Counting

• 4. Sell More
  • Optimize Your Point of Sale
    • Promotional Campaign
    • Organize Your Sales
    • KPI File
    • Organize Your Shelves
  • Business Innovations
    • Benefit from Your Point of Sale
    • Pop-up Stores
  • Customer Loyalty and Relationship
    • CRM Solution
    • Structuring Your Customer File
    • Customer Loyalty
    • Improve Customer Experience
    • Customer Management — CRM
    • Help Your Salespeople Complete Your Offers

    customer

    • Customer Loyalty Measures
    • CRM at the Service of Your Teams
    • CRM and Loyalty
    • CRM Keys
    • Fastmag Loyalty Programs
  • Best Sales
    • Improve Foot Traffic and Sales
    • Role of the Salesperson
    • Tracking Business Activities
    • Successful Retailers
• 5. Your Online Store
  • Your E-commerce Site
    • Checklist Before Opening Your E-commerce
    • Create an E-commerce Site
    • Have a Visible Site
    • The Importance of Having a Site
    • Benefits for Small Retailers
    • Choosing a CMS
    • Omnichannel
  • Online Store and Physical Store
    • Web Store
  • Unify Your Different Stocks
  • Your Web Communication Levers
    • The Visibility of My E-commerce
    • Issues for E-commerce Merchants
    • Social Networks
    • Click and Collect
    • Online Store Platforms
  • Your E-shop on Search Engines
    • SEO of Your Site
  • Marketplaces at the Service of Your Store
    • Marketplace Platforms

Article L 123-12 of the Commercial Code makes inventory mandatory for all non-agricultural commercial sector businesses. Thus, every year, starting from December 31, millions of companies conduct a census of finished products, semi-finished products, and raw materials that they attach to their balance sheet. How is this inventory useful? When should it be conducted and what are the keys to accounting inventory? Fastmag tells you everything about this legal obligation.

What is the Usefulness of Accounting Inventory?

At the end of each year, on December 31, the company’s accounting inventory is conducted. This inventory list includes:

Classic accounting elements, such as the company’s real estate or property, receivables, debts… Physically stored items for manufacturing (e.g., raw materials) as well as finished and semi-finished products

Thus, in the case of a tax audit, the company is able to prove the existence of its assets and that it owns them. Furthermore, in the event of resale, this material and immaterial inventory contributes to its overall valuation and provides a wide variety of performance indicators to potential buyers. It is therefore essential that its accounting inventory is perfectly fair.

Control of Theoretical and Physical Stocks

After counting the physical items, we cross-reference the collected data recorded on the inventory sheets with the theoretical stock recorded in the company’s accounting books. In the context of good stock management, there may be some discrepancies mainly due to known shrinkage (breakage, unsold goods due to obsolete technology…). If the inventory is poorly maintained or stolen, the company may have to notice discrepancies that can be very significant. It is therefore necessary to rethink its stock management, probably by computerizing it and conducting more regular inventories during the accounting period. Indeed, repeated discrepancies are negative indicators that can penalize it in the medium and long term.

Choose Fastmag Software to Manage Your Inventory and Accounting

To best manage your inventory and accounting, Fastmag offers cash management and accounting software along with barcode readers. Learn more

What is the Methodology of Accounting Inventory?

The accounting work of stocks follows a method that is practically the same from one company to another. They are characterized by the succession of five phases: the preparation of inventory work, the execution of a physical inventory, the valuation of stocks, the adjustment of various accounting items, and the accounting of different taxes.

Prepare Year-End and Inventory Work

Even before the end of the accounting period, the company must properly prepare its accounting inventory, also known as year-end work. This involves entering all supporting documents for the accounting period:

• purchase invoices
• sales invoices,
• accounting for personnel expenses,
• accounting for VAT returns.

It is also essential to modify a provisional accounting balance before the physical inventory so that it can be annotated during the revision work that begins with reconciling the amounts present on the auxiliary balances and the auxiliary books (customers and suppliers) with those present on the general balance (account 411 and 401). Once these checks are completed, the letter matching of customer and supplier third-party accounts is finished. Then, a “pre-review” is conducted.

Conduct Your Physical Inventory

As we have already seen, the physical accounting inventory focuses on verifying the existence of the company’s assets and liabilities.

Fixed Assets

The inventory of fixed assets identifies the assets removed from the company’s assets due to disposal or sale. It generates records of fixed asset exits and accounting for depreciation allocations;

Cash, Customer, and Supplier Accounts

The verification is conducted on accounts, including certain balances of third-party accounts (customers and suppliers).

Bank Balances

A bank reconciliation is always necessary, especially if the balance of the last statement does not match that of the “Bank” account in accounting.

Evaluate the Value of Stock

Generally performed by an accountant or with the help of an accountant, this step involves evaluating the stock to compare it with the accounting value of commercial items. This includes stocks, fixed assets that can also be depreciated, receivables that are difficult to collect, or even impossible to collect. The inventory value may also include provisions for various transactions (legal proceedings, warranties, penalties…). All these items are estimated as of the inventory closing date, which is December 31.

Adjust Accounting Positions and Results

The net separation between periods is monitored. Expenses and revenues that are recorded in the income statement of a period must be linked to that period. Therefore, we can distinguish:

• Revenues and expenses of the current accounting period, but current beyond the accounting period (called advances)
• Revenues and expenses for the following accounting period, but relating to the current accounting period (e.g., invoices to be prepared or not).

In addition, it is also necessary to adjust debts and liabilities in currency, to provide social security contributions and paid leave for its employees…

All these entries are called settlement accounting entries.

Accounting for Different Taxes

By entering stock entries, the company is able to assess and provision certain taxes such as VAT, the contribution to the added value of companies (CVAE), the tax on passenger vehicles (TVS), etc.

At the end of the five steps, the company has a final balance that can be edited for the preparation of annual accounts (balance sheet, profit and loss account, and appendix).

What Period Should Be Preferred for Conducting Your Inventory?

There are no legislative constraints regarding inventory dates. The organization of the latter is left to the discretion of companies. Thus, depending on their stock turnover and volume, they can choose between four methods.

Partial and Regular Stocks

If a company invests in ERP software, it is possible to conduct regular, permanent, or rotating inventories.

Permanent Inventory

The permanent inventory allows for identifying all products it manufactures or purchases at the very moment of their production or acquisition. Inventories are constantly updated with the ERP software. Therefore, stock discrepancies are null, and the company gains agility through its SMART flow management.

Count of Turnover

The counting of deadlines requires periodic inventories. Thus, the counting is smoothed over time, knowing that by December 31 everything must be counted. Depending on the turnover of items, a classification is made to count these last months, quarterly or once a year.

Year-End Stocks

If a company has few stocks or if regular inventories are an obstacle to its activity, it may be more appropriate to opt for an annual or intermittent inventory.

Annual Inventory

The inventory is conducted on December 31 and requires the cessation of any entry or exit of stocks. On this occasion, all finished products, semi-finished products, raw materials… are counted.

Intermittent Inventory

Intermittent stocks must treat all goods stored during the period as an accounting burden. At the end of the period, everything is transferred to the inventory account.

As we have seen, physical inventory plays an important role in a company’s accounting inventory. The lack of physical inventory does not close a company’s accounts. In fact, they cannot be filed with the Commercial Court. Furthermore, as specified by Article L241-4 of the Commercial Code, any absence of physical inventory is subject to a fine of 9000 euros.

To Know

• Used together, barcode readers and Fastmag software optimize stock management and facilitate the issuance of accounts on December 31. However, both and the software can be used independently of each other.
• Decree No. 83-1020 of November 29, 1983, states that the merchant must keep “a journal, a ledger, and an inventory book.” However, since the simplification law of May 17, 2011 (No. 2011-525), keeping this book is no longer a mandatory accounting obligation.

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