How Do You Check Inventory Cutoff at Year-End?

Build a bridge between what moved, what the business was entitled or obliged to record, and what the books show. A physical count establishes quantities at a location; your cutoff review asks whether movements around the boundary have been assigned to the appropriate period.

Physical possession, legal ownership and revenue recognition are separate questions. An invoice date or vehicle departure alone should not settle all three. Ask the accountant to apply the business's reporting framework and transaction terms.

Ask the accountant to define a review window on both sides of year-end, allowing for delivery times and posting delays. Include every shop, godown and third-party storage location. If the stock count happened at a different time, retain the movements needed to reconcile it to the reporting boundary.

• ✓Save the stock movement report, closing stock report and relevant accounting ledgers.
• ✓Collect goods receipt notes, dispatch records, delivery acknowledgements and return notes.
• ✓Keep purchase orders, customer orders, invoices, credit notes and agreed delivery terms together.
• ✓List goods with transporters, job workers and outside warehouses, plus goods held for another party.
• ✓Record the last document references before the boundary and the first references after it; explain gaps and cancellations.

Work from movement documents into stock records and accounts, then work back from recorded entries to supporting documents. The first direction looks for missing entries; the second challenges entries recorded without matching evidence. Include delayed invoices, manual entries, unusual transactions and cancelled movements.

1. Log the document reference, party, item, quantity, location and actual movement time.
2. Record the invoice date, stock posting date and accounting period separately.
3. Attach the delivery or receipt evidence and the relevant order terms.
4. Check the related inventory and purchase, payable, sales, receivable or cost entry, as applicable.
5. Record the discrepancy, proposed treatment, accountant's decision and correction reference.

Agree the coverage with the accountant. A few convenient documents do not establish that the whole boundary is correct. Expand the review where a missing sequence, delayed posting or repeated mismatch suggests a wider problem.

For receipts, investigate goods accepted before year-end whose invoice arrived later. Give the accountant the quantity, agreed price, acceptance evidence and booking status. Ask whether a purchase liability or other adjustment is needed; do not leave the item unresolved because the bill is missing.

For dispatches, trace the stock reduction and related accounting entries together. Flag goods invoiced but still in the godown, deliveries awaiting acceptance and goods sent on approval. The accountant should decide the treatment from the terms and applicable accounting requirements.

Separate a physical return from the commercial agreement and its accounting entry. For customer returns, collect the original sale reference, return request, receipt note, inspection result and credit-note status. Identify whether the goods are saleable, damaged or awaiting a decision.

For supplier returns, retain the dispatch evidence, supplier acknowledgement and debit or credit documentation. Record where the goods were at year-end and whether the supplier accepted the return. Ask the accountant which period needs an adjustment; do not assume the return date or credit-note date settles it.

Prepare a separate transit list for incoming purchases, outgoing deliveries and movements between your own locations. Record quantities, dispatch details, destination, carrier evidence and subsequent receipt confirmation. Match each item to the stock report so that it is neither counted twice nor silently omitted.

Attach the contract, purchase order, delivery terms and any acceptance conditions. Ownership can depend on the contract and relevant law; paying for freight or holding a transport document does not by itself answer every ownership question.

Identify consignment stock, customer-owned materials and goods with job workers separately. Seek quantity confirmations where appropriate, but refer the inclusion decision to the accountant. A quantity confirmation supports location and quantity; it does not replace the agreement explaining whose goods they are.

Illustrative example: a godown accepts 40 cartons before the reporting boundary. The receipt note is complete, but the supplier invoice arrives in the next period. The stock report includes the cartons, while the purchase ledger has no matching entry.

The reviewer attaches the receipt note, order price and acceptance evidence, then asks the accountant whether a year-end liability is required. After an approved adjustment, the reviewer checks both reports and records how the later invoice will be matched to prevent duplicate booking. The 40-carton quantity is illustrative.

• Using invoice dates as the only evidence and ignoring receipt, delivery or acceptance records.
• Treating every item inside the godown as business-owned stock.
• Correcting quantities without checking the related accounting entries.
• Backdating original documents instead of preserving evidence and recording an authorised adjustment.
• Closing an exception after a journal is proposed, without checking the final reports.

Keep the exception log with the close records. Use the finance operations guides to place this review within the wider close, and the supplier payment run weekly routine to organise unmatched supplier bills. The monthly bank reconciliation guide supports payment checks, but payment evidence does not settle inventory cutoff.