Stocktaking: what is counted, when, and with which simplifications

A plumbing wholesaler in Kassel, a registered merchant whose financial year is the calendar year, wants to spare his warehouse the December rush. He has the stock counted on 15 August 2026, arrives at inventories of 412,000 € and plans to use that list for the balance sheet at 31 December. The count date, however, lies before the window the German Commercial Code opens for an advanced stocktaking, and the list cannot support the balance sheet in that form.

Inventory list and stocktaking: record and process

Two words are often confused in practice. The stocktaking, or Inventur, is the process: counting, measuring, weighing, reconciling balances. The inventory list, or Inventar, is its result, a record of all assets and debts with quantity and value. The statute requires the record; the stocktaking is how one gets there.

The duty is laid down in § 240(1) HGB. When his business starts, every merchant records precisely his land, receivables and debts, his cash and his other assets. In doing so he also states the value of each individual asset and each individual debt.

Who is a merchant, and which small sole merchant is exempt from bookkeeping and the inventory under § 241a HGB, is explained in the course on the bookkeeping obligation. A GmbH or UG is always a merchant and therefore always draws up an inventory. This course starts where the duty is established.

The inventory list is more than a formality. The balance sheet is derived from it, and every gap carries over. A forgotten outside warehouse lowers the inventories, an overlooked supplier invoice lowers the debts, and both distort the year's profit, either in the same direction or against each other.

When the inventory list must be drawn up

Under § 240(2) HGB the opening inventory is followed by an inventory for the close of every financial year. The reference date is therefore not the day the counting takes place but the last day of the financial year. Everything the stocktaking establishes must hold for that date.

The same subsection limits the financial year: it may not exceed twelve months. It may be shorter, for example in the year of formation or when switching to a financial year that differs from the calendar year. It may never be longer, not even to avoid an awkward count at peak season.

The statute sets no fixed deadline in days or months for drawing up the inventory list. The third sentence only requires it to happen within the time that corresponds to an orderly course of business. In practice that means early enough for the annual accounts to build on it within their own deadline.

The deadlines for the accounts themselves, three or six months for corporations, are covered in the course on annual accounts. For the stocktaking they mean counting backwards: anyone who must prepare the accounts by the end of March needs the inventory list much earlier, because valuation, reconciliation and postings still follow.

Complete, and with the right owner

§ 246(1) HGB requires the annual accounts to contain all assets, debts and prepaid or deferred items. For the stocktaking this means that the warehouse is not the only thing recorded: cash, bank accounts, receivables, prepayments, liabilities and items held at other locations belong in the list too.

Assets are in principle attributed to their owner. If an asset is economically attributable to someone else, the second sentence places it in that person's balance sheet. Goods delivered under retention of title that sit in the buyer's own warehouse are therefore usually counted by the buyer, even though the supplier still owns them.

Conversely, goods a business holds at a commission agent or in a third-party warehouse belong in its own inventory list. They are not in its own yard, so they are easily forgotten. A confirmation from the warehouse keeper as of the reference date is the most reliable way to close that gap.

Subsection 2 prohibits offsetting. Items on the assets side may not be netted against items on the liabilities side, nor expenses against income. If a customer has both an open invoice and a balance from a credit note, both appear separately in the inventory list, not as a net difference.

The same subsection makes an exception for assets that are beyond the reach of all other creditors and serve exclusively to meet pension obligations. They are offset against those debts. For most small businesses this plays no role; anyone with such an arrangement should settle its treatment with their adviser.

Fixed value and group valuation

Not every item has to be counted and valued individually every year. § 240(3) HGB allows a fixed value for property, plant and equipment and for raw materials and supplies: a constant quantity at a constant value, carried forward unchanged from one year to the next.

The conditions are narrow. The items must be replaced regularly, their total value must be of minor importance for the business, and the stock may change only slightly in size, value and composition. Typical examples are scaffolding parts, tools, pallets or screws.

Counting does not disappear altogether. The second sentence requires a physical count as a rule every three years. If it shows that the stock has changed noticeably, the fixed value has to be adjusted. A fixed value that has stood unchanged in the books for ten years does not meet this rule.

Subsection 4 allows a second simplification, group valuation. Similar inventories and other similar or roughly equivalent movable assets and debts may be combined into a group and carried at the weighted average value. Unit prices then no longer have to be tracked item by item.

With group valuation the stock is still counted. Only the value is simplified: instead of assigning each unit its own purchase price, every unit in the group carries the same weighted average. This suits goods that arrive in many deliveries at fluctuating prices and are mixed together in storage.

Sampling stocktaking

§ 241 HGB brings together three further simplifications that work on the count itself. The first is in subsection 1: the stock may be determined by type, quantity and value using recognised mathematical and statistical methods based on samples.

The statute sets two conditions. The procedure must comply with the principles of proper accounting, and the informative value of the result must equal that of a complete physical count. A rough estimate drawn from a few counted shelves does not meet that standard.

In practice sampling pays off for large warehouses with many line items and reliable stock records. A small trade business with a manageable materials store gains little from it. The statistical method, its documentation and its review often take more time than simply counting everything.

Perpetual stocktaking

Subsection 2 detaches the count from the reference date. No physical count for the close of the financial year is needed if another procedure that complies with proper accounting ensures that the stock can be determined by type, quantity and value for that date without it.

The best known of these procedures is perpetual stocktaking. A stock ledger records every receipt and every issue by type and quantity. The stock is physically checked at intervals during the year, differences are corrected, and the stock at the reference date follows from the ledger.

So counting happens here too, just not all on the same day. The precondition is a stock ledger that can be trusted. If issues are not posted promptly, or materials taken to building sites are recorded only by word of mouth, the method does not hold, and only a count on the reference date remains.

Advanced or deferred stocktaking

Subsection 3 allows the count date to be moved away from the reference date. Assets need not be listed in the inventory for the close of the financial year if two conditions are met together. Both must be satisfied; one alone is not enough.

First, the merchant has recorded the stock by type, quantity and value in a special inventory list. That special list is drawn up for a day falling within the last three months before or the first two months after the close of the financial year.

Second, a roll-forward or roll-back procedure complying with proper accounting must ensure that the stock present at the reference date can be properly valued on the basis of the special list. With an advanced count one rolls forward; with a deferred count one rolls back.

Rolling forward starts from the counted value, adds receipts up to the reference date and deducts issues. Rolling back works the other way, from the later count date back to the reference date. In both cases reliable documents for goods received and goods dispatched in the interval are needed.

The example shows the method's strength and its weakness. It spares a count during the year-end rush but depends on the quality of the documents. If goods sold are deducted at selling price instead of cost, the rolled-forward value is wrong, and the error slips unnoticed into the balance sheet.

Cost flow: which stock leaves first

With similar inventories bought at different prices, the question is which units are still there at the reference date. § 256, first sentence, HGB allows an assumption, to the extent it complies with proper accounting: the units acquired first, or those acquired last, are treated as used first.

Assuming that the units bought first leave first is called Fifo. The closing stock then consists, on paper, of the most recent purchases. Assuming the opposite is called Lifo: the closing stock consists of the oldest purchases. The second sentence also admits the average under § 240(4) HGB.

For tax purposes the choice is narrower. § 6(1) no. 2a EStG allows businesses that determine their profit under § 5 EStG only the Lifo assumption, and only to the extent it complies with the commercial principles of proper accounting. The Income Tax Act does not provide for a Fifo assumption.

Once Lifo has been chosen, the business is bound by it. Under the third sentence, it may depart from it in later financial years only with the tax office's consent. The second sentence governs the start: the stock at the end of the previous year counts, at its balance sheet value, as the first receipt of the new financial year.

The cost-flow assumption only fixes the starting value. Whether that value can still be carried at the reference date, or must be reduced to a lower market or going-concern value, is a second question. It follows the valuation rules of the next module, which are applied to each of the three values.

Organising the stocktaking

The statute says what the inventory list must achieve, not how to count. A written instruction before the count date has proved its worth: which areas, which teams, which count sheets, how to handle damaged goods, and who collects the sheets after the count.

Counting and writing down should be done by different people, and the count sheets should be numbered in advance. That way a missing sheet stands out. No goods should be moved during the count, or every movement is recorded with the time, so that it can be assigned to the right moment.

Damaged, obsolete or slow-moving goods are marked during the count itself. They will later not be valued at full purchase price, and that information is lost if it is not on the count sheet. The next module shows why it is decisive for the balance sheet value.

Finally, cut-off at the reference date: goods that arrived on 31 December but whose invoice only comes in January belong in the inventory list, and so does the related debt. Goods already sold and delivered no longer belong. Delivery notes around the reference date are the key source for this.