Why physical stock verification matters
For traders, manufacturers and online sellers, inventory is often the largest asset on the balance sheet, and the figure most likely to be wrong. The book stock in Tally drifts from reality through missed entries, unrecorded returns, damage and wrong item codes. When the bank, auditor or a GST officer finally checks, the difference has to be explained.
KSV’s team carries out physical stock counts and inventory reconciliations for businesses across Gurugram, including godowns along the Delhi–Jaipur highway, factories in Manesar and Udyog Vihar, retail shops and e-commerce sellers. We give you a count you can rely on, a reconciliation you can explain and stock figures that the books, the bank and the tax filings can use.
What we do
| Service | What it involves |
|---|---|
| Physical stock counting | Item-wise count at each location, with count sheets signed by your representative |
| Book vs physical reconciliation | Comparison with Tally stock, investigation of differences, adjustment entries for your approval |
| Valuation support | Cost working by item, lower of cost and NRV test, and write-down list |
| Ageing analysis | Stock grouped by age, highlighting slow-moving and non-moving items |
| Damaged, expired and obsolete stock | Identification, segregation, photographs and write-off documentation |
| Stock statements for banks | Monthly or quarterly statements of stock and debtors for drawing power |
| Bank stock audit support | Working papers and reconciliations for the bank-appointed or associated CA stock auditor |
| Marketplace inventory reconciliation | Books matched with marketplace inventory, returns and reimbursement reports |
How a physical count is carried out
- Planning. We agree the date, locations, item list and team size with you, and ask for a stock listing from Tally as on the count date.
- Preparation. Your staff arrange stock by item, separate damaged goods and goods held for others, and stop or control movement during the count.
- Cut-off. We record the last sales invoice, purchase receipt, delivery challan and production slip before the count, so that goods are counted in the right period.
- Counting. Items are counted in teams, tagged as counted, and recorded on count sheets. High-value items are counted twice.
- Test checks. We trace samples from the floor to the list and from the list to the floor.
- Sign-off. Count sheets are signed by our team and your representative at the end of the count.
Reconciling physical stock with the books
| Common cause of difference | How we find it |
|---|---|
| Sales or dispatches not invoiced | Delivery challans and gate passes compared with invoices |
| Purchases received but bill not entered | Goods received notes compared with purchase entries |
| Customer returns not recorded | Return documents and marketplace return reports checked |
| Wrong item or unit booked | Item master and units of measure reviewed |
| Production and consumption not entered | Bills of material and production records checked |
| Damage, theft or loss | Physical condition, CCTV and incident records reviewed with you |
| Goods sent for job work or held for others | Job work challans and third-party stock records checked |
Once the reasons are found, we prepare adjustment entries for your approval and update the books through our bookkeeping team. Unexplained shortages and excesses are shown separately, because they may need to be addressed in GST and income-tax filings.
Valuation in plain words
Accounting Standard 2 (AS 2), and Ind AS 2 for companies following Ind AS, says inventory is valued at the lower of cost and net realisable value (NRV).
- Cost is what you paid to bring the goods to where they are now and in their current condition: purchase price, inward freight and handling, and for manufacturers, materials, labour and a share of production overheads. GST that you can claim as input credit is not part of cost.
- NRV is what you expect to get on sale, less any cost still needed to finish and sell the goods.
- Why it matters. If an item can only be sold below its cost, because it is damaged, out of fashion or near expiry, it must be written down to NRV. Carrying old stock at full cost overstates profit and net worth.
- Cost formula. Cost is normally worked out on FIFO or weighted average basis, applied consistently from year to year.
Stock statements and bank requirements
Borrowers with cash credit limits submit stock and debtor statements to the bank, usually every month, and the bank calculates drawing power from them. Banks also appoint stock auditors for larger accounts, according to their own policy.
- We prepare stock statements from reconciled books, not from estimates, so that the figures match the next audit.
- Ageing of stock and debtors is shown in the format the bank asks for, since older stock and debtors may not be counted for drawing power.
- Where a bank requires a stock audit report signed by a Chartered Accountant, it is signed by an associated firm of practising Chartered Accountants, and our team provides the counting and working papers.
If you are applying for a new limit, see our loan documentation page.
Marketplace and warehouse inventory
Online sellers often hold stock in their own godown, in third-party warehouses and in marketplace fulfilment centres at the same time. Units move between them, get returned in damaged condition, or are lost in transit. We reconcile:
- Opening stock, inward shipments, sales, customer returns and removals for each warehouse.
- Units reported lost or damaged by the marketplace, and reimbursements received for them.
- Stock transfers between your GST registrations in different states, which are taxable supplies.
Our e-commerce seller GST team handles the related GST reporting.
Stock differences in GST and income-tax proceedings
During GST inspections and audits, officers may count stock and compare it with the books. Shortages may be treated as supplies made without invoices, and excess stock as purchases not recorded. A recent, signed physical count with a reconciliation is strong evidence in reply. If you have received a notice on stock differences, our GST notice reply team can help prepare the response.
Contact us to plan a stock count at your location in Gurgaon or nearby.
Frequently asked questions
What is the difference between stock counting and a stock audit?
Stock counting is the physical count of items at a location on a given date. A stock audit goes further, comparing the count with the books, checking valuation, ageing and condition, testing the documents behind receipts and issues, and reporting differences. Banks often appoint their own stock auditors for borrowers with larger limits.
Does KSV sign bank stock audit reports?
Where a bank requires a stock audit report signed by a Chartered Accountant, it is signed by an associated firm of practising Chartered Accountants after their review. KSV is an accounting and taxation consultancy; our team carries out the counting, reconciliation and working papers in support.
How is closing stock valued?
Under Accounting Standard 2 (AS 2), and Ind AS 2 for companies following Ind AS, inventory is valued at the lower of cost and net realisable value. Cost includes purchase price, inward freight and other costs of bringing the goods to their present location and condition, but not GST for which input credit is available. Net realisable value is the expected selling price less costs to complete and sell.
How often should physical stock be counted?
At least once a year at the year end, close to the balance sheet date. Businesses with high-value or fast-moving stock benefit from monthly or quarterly cycle counts of selected items, so differences are found early.
What happens to damaged or expired stock under GST?
Input tax credit is not available on goods lost, stolen, destroyed, written off or given away as free samples. If credit was already taken, it must be reversed. Recording write-offs properly, with evidence, avoids disputes in GST audits and notices.
Can you count stock lying in Amazon or Flipkart warehouses?
Physical access to marketplace fulfilment centres is not usually available. Instead we reconcile your books with the marketplace's inventory and reimbursement reports, track units in transit, returns and lost or damaged units, and follow up claims with you.
How much time does a stock count take?
It depends on the number of items, locations and how well the stock is arranged. A small shop may take a few hours; a large warehouse can take one or more days. We plan the count with you in advance so that business disruption is minimal.
Stock count ke din dispatch band karna padega kya?
Ideally haan, ya kam se kam controlled rakhna padega. If dispatches and receipts cannot be stopped, we record the last document numbers before and after the count and adjust movements during the count, which is called cut-off.
Why does a difference between physical and book stock matter?
A large shortage may indicate theft, wrong entries or unrecorded sales, and excess stock may indicate unrecorded purchases. In GST and income-tax proceedings, officers can treat unexplained differences as unaccounted supplies or income. Reconciling and explaining differences protects you.