The annual inventory of assets and liabilities is one of the fundamental obligations for all non-profit organizations, regardless of whether they use single-entry or double-entry bookkeeping. This process helps align the actual state with the accounting records and ensures the accuracy of financial statements and the legality of the organization’s operations.
For the fiscal year 2024, the inventory of assets and liabilities must be conducted as of December 31, 2024, and the results must be recorded in the financial books for the same year.
Specific Provisions for Library Activities
One exception to the annual inventory obligation is that organizations engaged in library activities are not required to inventory books annually but can do so every three years. This provision allows libraries, given the extensive amount of materials they manage, flexibility.
The Role of the Legal Representative in Conducting the Inventory
The legal representative of a non-profit organization is primarily responsible for organizing and conducting the inventory.
- Determines the inventory date – You can conduct the inventory a few days before or after December 31, as long as it accurately reflects the actual state as of the last day of the year.
- Defines deadlines – Completing the inventory and submitting the report with the accompanying inventory lists.
- Makes decisions – Based on the inventory results and according to the authority defined by the organization’s statutes or other key governing documents.
The legal representative’s decisions often include approving adjustments to the financial records, especially in cases where discrepancies between the actual and book-recorded states are identified.
Content of Inventory Lists
The inventory lists, which are critical documents in this process, must include the following data:
• Actual (inventory) state – The physical state of assets and liabilities.
• Book-recorded state – The state recorded in the organization’s financial books.
• Expression of state – In natural units (e.g., quantity) and monetary amounts (€).
These data enable comparisons and analysis of the states and facilitate the identification of potential discrepancies.
Responsibilities of the Inventory Committee
An inventory committee is established to conduct the inventory. Its task is to review the assets and liabilities and prepare a report based on the inventory lists and observations.
The inventory committee submits its report to the legal representative, who then decides on the next steps. These actions include adjustments in the financial records, such as the write-off of assets, recognition of shortages or surpluses, and other necessary changes to align the records.
Why is the Inventory Important?
The inventory of assets and liabilities is critical for:
• Aligning financial records with the actual state – the basis for accurate financial statements.
• Business transparency – Provides a more precise overview of the organization’s resources and obligations.
• Strategic planning – Helps organizations make better decisions based on accurate data about assets and liabilities.
In addition to being a legal obligation, regular inventory ensures the credibility of operations and fosters trust among the public, donors, and partners.
Conclusion
Implementing the annual inventory of assets and liabilities is not just a formal obligation but a vital tool for effective asset and financial management in non-profit organizations. Properly conducted inventory contributes to greater transparency and legality of operations and better preparation of the organization for future challenges and opportunities.
If you need assistance or professional advice regarding the preparation and implementation of the inventory, please get in touch with our team. Our experts, with years of experience in accounting and financial consulting, are here to help you fulfil all legal obligations and enhance your organization’s operations.
