Submission of Inventory List - ReliaBooks (2023)

Submission of Inventory List - ReliaBooks (1)

According to Section 13 of Revenue Regulations No. V-1, otherwise known as the Bookkeeping Regulations,

Persons required by the laws to pay internal revenue taxes on business shall keep, in addition to the other books and records, a book of inventories.

But not all taxpayers, bookkeepers, and accountants know that.

They will just know that if the taxpayer decided to close his/her business.

Not filing of Inventory List will not only cause you delay.

It will cause you penalties amounting P1,000 – P25,000 per year.

And even though you already paid the penalties,

you still need face the hassle of preparing and submission of inventory list before you can close your business.

And this is because of simply not knowing the importance of submission Inventory list.

If you want to know how to comply with Submission of Inventory List, this free guide is for you.

After reading this guide, you will learn:

1. What is Inventory List?

2. Who are required to submit Inventory List?

3. When is the Deadline of Submission of Inventory List?

4. Where to Submit Inventory List?

5. What are the Prescribed Format in Submission of Inventory List?

6. What are the Penalties when it comes to Non-Compliance of Inventory List?

1. What is Inventory List?

Inventory List is composed of maintaining inventory of stock-in-trade, raw materials, goods in process, supplies and other goods of companies.

The said schedules/list should be reconciled with the amount declared in the financial statements and annual income tax returns.

2. Who are required to submit Inventory List?

All taxpayers with tangible asset-rich balance sheets, often with at least half of their total assets in working capital assets, like accounts receivable and inventory, shall submit inventory list.

This shall cover companies such as manufacturing, wholesaling, distributing/retailing sectors including real estate dealers/developers, service companies, e.g. construction companies, building contractors, etc.

3. When is the Deadline of Submission of Inventory List?

Filing of Inventory List shall be submitted every 30th day following the close of the taxable year.

This is usually filed on or before Jan. 3 to 30.

4. Where to Submit Inventory List?

The inventory lists as well as other applicable schedules are to be submitted with the concerned Revenue District Office (RDO) where non-large taxpayers are registered.

And with the Large Taxpayers Assistance Division (LTAD), Excise Large Taxpayers Regulatory Division (ELTRD), Large Taxpayers Division (LTD) Makati and Cebu,

For taxpayers classified as large under Large Taxpayers Service.

5. What are the Prescribed Format in Submission of Inventory List?

If you’re required to submit Inventory List, here are the things you need to submit.

A. Annex A / B / and/or C

B. Annex D


A. Annex A – C of RMC No. 57-2015

a. Annex A of RMC No. 57-2015 for Retail and Manufacturing Industry

b. Annex B and B-1 of RMC No. 57-2015 for Real Estate Industry

c. Annex C of RMC No. 57-2015 for Construction Industry

B. Annex D of RMC No. 57-2015

The taxpayer need to submit a notarized certification, duly signed by the taxpayer that the data/information contained in the DVD-R are true and correct.


Hard and Soft copies of the inventory list including other applicable schedules shall be stored/saved in Digital Versatile Disk-Recordable (DVD-R)

The DVD-R shall be properly labeled.

6. What are the Penalties when it comes to Non-Compliance of Inventory List?

A.For Failure to make, file or submit

P1,000 for each information return, schedule, report, sworn statements, certification and other document not made, filed or submitted, or for each record not maintained.

B. For Failure to Supply Correct and Accurate Information

Graduated penalties ranging from P1,000 – P25,000 depending on the amount of gross sales, receipts or Inventories.

The aggregate amount to be imposed for such failures during a calendar year shall not exceed P25,000.


A. Submission of Inventory List and Other Reporting Requirements (RMC No. 57-2015)

B. Revised Schedule of Compromise Penalty (Annex A of RMO No. 7-2015)

What’s Next?

D. If you have questions and comments regarding tax, accounting, and business registrations, you canContact ushere.


How much is the penalty for non submission of inventory list? ›

P1,000 per failure to submit per return or per information, up to P25,000 per year for each category. One information per buyer/seller is one offense.

Who must submit annual inventory list? ›

The BIR requires businesses to trade or sell goods to submit the annual inventory listing before January 30.

How do I submit my inventory list to Bir? ›

The soft copies of the Inventory List and the additional schedules and reports must be submitted via an accurately labeled DVD-R, along with a Notarized Certification signed by the authorized representative of the taxpayer. This Certificate is to certify that the information contained on the DVD-R is true and accurate.

What information is required on an inventory log? ›

An inventory list is a complete, itemized list of every product your business has in stock. This includes your raw materials, work-in-progress, and finished goods. An inventory list should include each item's SKU number, name, description, cost, and quantity in stock.

Can you write-off missing inventory? ›

If specific inventory items have not been identified, businesses can set up a reserve for inventory write-offs. To write-off inventory, you must credit the inventory account and record a debit to the inventory.

Can you write-off unsold inventory? ›

tax methods. In regards to GAAP, once you have identified inventory that you cannot sell, you must write this inventory off as an expense. Assuming no receipt of payment for the inventory, you will debit a cost of goods sold account and credit either inventory directly or your inventory reserve account.

What does the IRS consider inventory? ›

Inventory is made up of all the items that a business has on hand to sell, as well as all of the goods that the company will use to manufacture income-producing goods. While inventory is not directly taxable, it is used to calculate a business's cost of goods sold, or COGS.

Does the IRS require inventory? ›

Summary. Businesses generally must use inventories for income tax purposes when necessary to clearly reflect income. To clearly reflect income, businesses must take inventories at the beginning and end of each tax year in which the production, purchase or sale of merchandise is an income-producing factor.

How do you do a proper inventory list? ›

In general, an inventory list should include the product's name, SKU number, description, pricing, and quantity. Inventory lists help brands manage and monitor their stock levels, allowing for greater inventory control and a more streamlined approach to inventory management.

Do I have to count inventory for taxes? ›

Yes. At the end of the year, your business will be taxed on your profits, which your inventory indirectly affects because it will lower your earnings. This will then reduce your taxable income. Your profits are your total revenue minus the cost of goods sold (COGS).

Can you write-down inventory for tax purposes? ›

Mitigating Losses by Writing Down Inventory

Writing down unsalable inventory is a way for you to speed up a tax deduction that might otherwise weigh down your balance sheet. A write-down lowers your total liability by reducing taxable income.

How do I report a loss of inventory on my taxes? ›

If you're a sole proprietor, you'll have to file a form 1040 schedule C: Profit or Loss From Business, along with your individual tax return to report your earnings from your business. Inventory shrinkage is reported on line 39 (other costs) under Part III: Cost of Goods Sold, with an attached explanation.

What should not be reported as inventory? ›

The correct answer is Option (d). Machinery used in the production process will not be classified as inventory.

What are the 3 key measures of inventory? ›

We've put together a list of four crucial metrics that you should keep a close eye on over the course of the year: inventory turnover, average days to sell, return on investment, and inventory carrying costs.

What should not be included in inventory? ›

Inventory does not include supplies, which are considered to be charged to expense in the period purchased. Also, customer-owned inventory should not be recorded as inventory owned by the company. Further, supplier-owned inventory located on the premises should also not be recorded as inventory.

What causes inventory write-off? ›

A write-off occurs when the value of inventory falls to zero — it no longer has any worth. A write-down occurs when the inventory's fair market value falls below the cost of the inventory recorded on the balance sheet, but the item can still be sold for some amount north of zero.

When should inventory be written off? ›

Writing off inventory involves removing the cost of no-value inventory items from the accounting records. Inventory should be written off when it becomes obsolete or its market price has fallen to a level below the cost at which it is currently recorded in the accounting records.

How do you record worthless inventory? ›

Obsolete inventory is written-down by debiting expenses and crediting a contra asset account, such as allowance for obsolete inventory. The contra asset account is netted against the full inventory asset account to arrive at the current market value or book value.

Can a business write-off expired inventory? ›

Can I write off expired inventory? Expired inventory can be written off as if it were lost or damaged because it has lost its market value and can no longer be used for its normal intended purposes.

Can I expense inventory when I purchase it? ›

Businesses with inventory, however, were generally required to account for the inventory on an accrual basis. What this means is that you could only deduct the cost of the inventory when you sold inventory, not when you purchased it.

Is it better to have more or less inventory at the end of the year? ›

If you have overstated your ending inventory, it will have an adverse effect on your tax payable, as your COGS will be understated, resulting in more taxable income. If, on the other hand, you have an understated ending inventory, you will have an overstated COGS.

What are the four 4 categories of inventory? ›

While there are many types of inventory, the four major ones are raw materials and components, work in progress, finished goods and maintenance, repair and operating supplies.

Does inventory affect income statement? ›

An inventory write-down impacts both the income statement and the balance sheet. A write-down is treated as an expense, which means net income and tax liability is reduced. A reduction in net income thereby decreases a business's retained earnings, which would then decrease the shareholder' equity on the balance sheet.

Which inventory method is best for tax purposes? ›

The first-in, first-out (FIFO) inventory cost method assumes the oldest inventory is sold first. This leads to minimizing taxes if the prices of inventory items are falling.

Do you have to do inventory? ›

Reporting inventory on your tax return is essential to determine your income or loss for the year. More specifically, you need to figure your cost of goods sold (COGS). This is the cost of items or materials to make them (i.e., the cost of buying or manufacturing inventory).

What is the 80/20 rule in inventory? ›

The 80/20 rule states that 80% of results come from 20% of efforts, customers or another unit of measurement. When applied to inventory, the rule suggests that companies earn roughly 80% of their profits from 20% of their products.

What is the simplest way to manage inventory? ›

Here are some of the techniques that many small businesses use to manage inventory:
  1. Fine-tune your forecasting. ...
  2. Use the FIFO approach (first in, first out). ...
  3. Identify low-turn stock. ...
  4. Audit your stock. ...
  5. Use cloud-based inventory management software. ...
  6. Track your stock levels at all times. ...
  7. Reduce equipment repair times.
May 27, 2021

What are the 5 steps to effective inventory systems your answer? ›

5 Steps to Successful Inventory Management
  • Create a System to Get Accurate and Accessible Information on Your Inventory. ...
  • Create a Unique Process Customized for Your Business Type. ...
  • Keep an eye on Contemporary trends in the industry. ...
  • Be prepared for fluctuations in supply and demand.
Sep 29, 2021

Do I have to count inventory manually? ›

Benefits of Doing a Physical Inventory Count

Physical inventory counts are an essential part of keeping inventory records accurate and current. Up to date inventory records provide for better forecasts of sales and purchases and ensures you always have the right amount of product on hand.

What can be counted as inventory? ›

Inventory can be categorized in three different ways, including raw materials, work-in-progress, and finished goods. In accounting, inventory is considered a current asset because a company typically plans to sell the finished products within a year.

Does inventory raise taxes? ›

Taxes are paid on the levels of inventory kept, meaning that a high level of stock translates to a higher tax amount. The business owner considers the inventory unsold at the end of the financial year, when calculating the tax to pay. Unsold inventory affects the tax bill, so it should be handled with care.

How does unsold inventory affect taxes? ›

Inventory tax is a “taxpayer active” tax. That means that it must be calculated by the taxpayer (business owner). Unsold inventory should be counted and valued based on one of the three accepted valuation methods: cost, retail, or lower of cost or retail.

What happens if you don't report stock losses to IRS? ›

If you do not report it, then you can expect to get a notice from the IRS declaring the entire proceeds to be a short term gain and including a bill for taxes, penalties, and interest.

How much stock losses can you write-off? ›

Your claimed capital losses will come off your taxable income, reducing your tax bill. Your maximum net capital loss in any tax year is $3,000. The IRS limits your net loss to $3,000 (for individuals and married filing jointly) or $1,500 (for married filing separately).

Do I have to report all stock losses? ›

If you experienced capital gains or losses, you must report them using Form 8949 when you file taxes. Selling an asset, even at a loss, has crucial tax implications, so the IRS requires you to report it.

What are some examples of inventory errors? ›

If no one adjusts this number to match actual costs, then the inventory will be valued at a cost that does not match actual costs.
  • Incorrect Inventory Layering. ...
  • Incorrect Part Number. ...
  • Cycle Counting Adjustment Error. ...
  • Customer-Owned Inventory. ...
  • Consignment Inventory. ...
  • Improper Cutoff. ...
  • Transfer Imbalance.
Aug 18, 2022

How do you avoid mistakes in inventory? ›

5 Ways to Prevent Inventory Errors
  1. Simplify Processes Wherever Warehouse Workers are Involved. Human error lies at the heart of most preventable inventory issues in your warehouse. ...
  2. Keep Locations Organized. ...
  3. Label Everything. ...
  4. Track All Items by Location.
Feb 23, 2021

What does GAAP say should be disclosed for inventory? ›

Under US GAAP, companies that use the LIFO method must disclose in their financial notes the amount of the LIFO reserve or the amount that would have been reported in inventory if the FIFO method had been used.

What are the 4 basic reasons for keeping an inventory? ›

Four very good reasons to hold inventory
  • Expecting the unexpected. By far the greatest adversary any inventory manager is expected to overcome is fluctuating consumer demand. ...
  • A time to buy and a time to buy more inventory. ...
  • Capitalizing on low cost offers. ...
  • Putting on bottom-line body armor.
Oct 19, 2015

What are the 4 tips when it comes to inventory control? ›

21 Inventory Management Tips
  • Learn about the four kinds of inventory. ...
  • Manage vendor and supplier relationships. ...
  • Plan for the unexpected. ...
  • Prioritize your inventory. ...
  • Understand the 80/20 inventory rule. ...
  • Be consistent in how you receive stock. ...
  • Order restocks yourself. ...
  • Don't take a one-size-fits-all approach.
May 3, 2021

What are the 4 factors influencing inventory levels? ›

6 Factors Affecting Inventory Management
  • Financial Factors. Factors such as the cost of borrowing money to stock enough inventory can greatly influence inventory management. ...
  • Suppliers. Suppliers can have a huge influence on inventory control. ...
  • Lead Time. ...
  • Product Type. ...
  • Management. ...
  • External Factors.
Jul 19, 2017

What are the top three to five principles of inventory management? ›

There five key principles of inventory management:
  • demand forecasting,
  • warehouse flow,
  • inventory turns/stock rotation,
  • cycle counting and.
  • process auditing.

What are the two basic issues in inventory? ›

The two basic issues in inventory are how much to order and when to order. Quantity and timing are the two basic issues in inventory management.

What are the consequences if inventory is not tracked? ›

The effects of too little inventory

Not keeping track of inventory levels can lead to stock out of popular items during a sudden surge in demand. This can happen due to peak season or other external factors. Having sufficient stock is crucial.

What is the non filing penalty? ›

The Failure to File Penalty is 5% of the unpaid taxes for each month or part of a month that a tax return is late. The penalty won't exceed 25% of your unpaid taxes.

What is the penalty that is issued for non compliance? ›

The penalties for non-compliance vary depending on the severity of the offence but can range from a public reprimand to a financial penalty or even jail time.

What happens if a company doesn't have inventory? ›

Not having enough inventory means you run the risk of losing sales during a stock out. On the other hand, having too much can also be costly in many ways. Without an inventory management system, you risk these costs and other areas of inefficiency.

What are the signs of poor inventory management in a company? ›

Here are some of the most obvious symptoms of poor inventory management:
  • High-cost goods.
  • Stockouts.
  • Slow or low inventory turn.
  • Obsolete items in inventory.
  • Excessive working capital requirements.
  • High-cost storage.
  • Spreadsheet (data-entry) errors.
  • Customer shipping errors.
Jul 6, 2021

Can the IRS put you in jail for unpaid taxes? ›

While the IRS does not pursue criminal tax evasion cases for many people, the penalty for those who are caught is harsh. They must repay the taxes with an expensive fraud penalty and possibly face jail time of up to five years.

Does the IRS ever forgive penalties? ›

The IRS can abate penalties for filing and paying late if there is reasonable cause. Generally, interest charges may not be abated and continue to accrue until all assessed tax, penalties, and interest are paid in full. The law does provide exceptions for allowing abatement or suspension of interest.

Can you go to jail for not filing local taxes? ›

Most tax offenses are classified as civil offenses, not criminal. That means that, even if you end up in hot water, you'll usually be punished with fines and hefty interest payments — not prison.

What are the 3 consequences for non compliance? ›

5 consequences of failing to comply with legislation
  • Fines. Perhaps the first and most obvious consequence is the possibility of the organisation being fined for non-compliance. ...
  • Imprisonment. ...
  • Loss of Reputation. ...
  • Loss of Current or Potential Staff. ...
  • Down time and Loss of Productivity.

What are two consequences of non compliance? ›

Consequences of non-compliance with legislation
  • Fines. We can't throw an entire company in jail, so the most common consequence for corporations who breach legislation is a fine. ...
  • Removal from ASX. ...
  • Insurance. ...
  • Unenforceable Contracts. ...
  • Criminal Consequences. ...
  • Tax Liability.

How do you overcome poor inventory management? ›

20 Solutions to Overcome Inventory Management Challenges
  1. Centralized Tracking: Consider upgrading to tracking software that provides automated features for re-ordering and procurement. ...
  2. Transparent Performance: ...
  3. Stock Auditing: ...
  4. Demand Forecasting: ...
  5. Add Imagery: ...
  6. Go Paperless: ...
  7. Preventive Control: ...
  8. Measure Service Levels:
Feb 3, 2022

What causes poor inventory management? ›

These include limited storage space, higher inventory carrying costs, or lack of a dedicated inventory team to address issues fast. While every business tends to develop its own inventory control strategies, the culprits of poor control tend to be the same in most cases.

Can a company have 0 inventory? ›

With a zero inventory strategy, items aren't accumulating and sitting around in a warehouse. As a result, zero inventory is sometimes called a just-in-time stocking model. New inventory is produced or purchased just in time to fill new orders.

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