Inventory in Croatia is a mandatory procedure for all legal entities and craftsmen, and the rules on who is obligated and when it is carried out are governed by the Accounting Act, the General Tax Act and other relevant regulations.

  1. Accounting Act

According to the Accounting Act (Official Gazette 120/16 – 85/24), all legal entities are required to conduct an inventory of assets and liabilities at least once a year. This obligation is prescribed in Article 15 of the Accounting Act, which states that every legal entity is obliged to carry out an inventory of assets and liabilities, on the date of drawing up the financial statements in order to harmonize the accounting balance with the actual balance.

Article 14, paragraph 1 of the Accounting Act states:

“Entrepreneurs are obliged to list their assets and liabilities at least once a year, on the basis of which they will harmonize the accounting balance with the actual balance.”

  1. General tax law

According to the General Tax Law (Official Gazette 115/16-114/22), taxpayers are obliged to keep proper business books and records. If the taxpayer uses goods for his business or sells goods, he is obliged to carry out an inventory to ensure accurate data for tax purposes.

Article 66, paragraph 14 of the General Tax Code prescribes:

“The taxpayer is obliged to list assets and liabilities in order to harmonize the actual situation with that shown in the business books.”

  1. Rulebook on the implementation of the General Tax Code

This ordinance additionally specifies how inventories are conducted, especially for taxpayers who keep business books and records. In practice, the inventory is carried out at the end of the business year, before drawing up the financial statements.

  1. Craftsmen

Craftsmen who keep business books according to the principle of double-entry bookkeeping are also obliged to conduct an inventory at the end of the year.

In conclusion, the inventory is a legal obligation for all entrepreneurs and tradesmen to ensure that the financial statements accurately reflect the actual state of assets and liabilities.

 

How the inventory is carried out

The inventory is carried out in order to determine the actual state of assets and liabilities of the entrepreneur, and the procedure includes several key steps. Here is a detailed description of how the inventory is carried out in accordance with the laws and regulations in Croatia:

  1. Preparation for inventory

Before the actual inventory, it is necessary to take several preparatory steps:

  • Establishment of the inventory commission: The employer appoints a commission that is responsible for carrying out the inventory. Committee members may not be persons who are directly in charge of keeping records of inventoried assets.
  • Defining scope: It is determined which part of the assets and liabilities will be listed. The inventory can cover all assets (tangible and intangible) and liabilities, or it can refer to specific categories (eg inventories, fixed assets).
  1. Carrying out a physical inventory

During the physical inventory of assets, the actual inspection and counting is performed:

  • Tangible assets: Stocks (goods, raw materials, materials), long-term assets (machines, equipment, real estate) and small inventory are physically inspected.
  • Inventory: Counted, measured or weighed, depending on the type of asset, to determine quantity and condition. Each member of the inventory committee must be present at the census.
  • Fixed assets: The physical condition of machines, equipment, tools is checked and reconciled with accounting records. Any unusable asset and the asset that needs to be written-off is also recorded.
  1. List of liabilities and claims

In addition to physical assets, the inventory includes the listing of liabilities and receivables:

  • Receivables: The state of outstanding receivables from customers and other business partners is listed, and their compliance with business books is checked.
  • Liabilities: The inventory includes the listing of liabilities to suppliers, credit liabilities and other debts. It is necessary to determine the exact amount of outstanding liabilities to creditors.
  1. Comparison with the book balance

After the inventory, the actual balance of assets and liabilities is compared with accounting data. The goal is to determine any differences, i.e. deficits or surpluses.

  • Deficits: If it is determined that the actual balance of inventory or other assets does not correspond to the accounting balance, it is necessary to record a deficit.
  • Surpluses: If the actual balance is greater than recorded in the business books, a surplus is recorded.
  1. Reconciliation of balance

After the deficits or surpluses have been determined, the entrepreneur is obliged to reconcile the accounting balance with the established actual balance. This means that the necessary corrections will be posted:

  • Deficits: Expenses of the company are debited, unless the deficit can be attributed to the responsible person who is obliged to compensate for the damage.
  • Surpluses: Surpluses are recorded as company income.
  1. Creating an inventory report

At the end of the inventory, the inventory committee draws up an inventory report that contains:

  • Listed statements of assets and liabilities,
  • Comparison with the balance in the business books,
  • Determined differences (deficits and surpluses),
  • Recommendations for alignment.

The report must be certified by the committee members and the responsible person of the entrepreneur. This report is the basis for any changes in the financial statements.

  1. Implementation of the inventory in accordance with the deadlines.

The inventory is usually carried out:

  • At the end of the business year: As a mandatory procedure for harmonizing financial statements.
  • In the case of status changes: During the liquidation, restructuring, merger or division of the company.
  • Extraordinary inventory: It can be carried out at the request of the management or competent authorities in case of suspected non-compliance.

The Act on Accounting does not exactly define the date when it is necessary to carry out the inventory, but it would certainly be desirable to have it as close as possible to the end of the calendar year, i.e. December 31.

A properly conducted inventory is essential for the accuracy of financial statements, as well as for tax purposes, to ensure proper bookkeeping and compliance with the law.

 

Penalty

For failure to conduct an inventory, the Accounting Act prescribes fines in the amount of 1,320 to 13,270 euros for an entrepreneur, or from 660 to 2,650 euros for a responsible person.

The obligation to carry out an inventory is also prescribed by the General Tax Law, which defines that the inventory must be carried out at the beginning and at the end of each business year. For non-fulfillment of the inventory obligation, the General Tax Code prescribes fines in the amount of: from 260 to 26,540 euros for an entrepreneur, or from 260 to 2,650 euros for a responsible person.

 

Author, Admin

SOURCE:

Accounting Act (Official Gazette 120/16 – 85/24)
General Tax Act (Official Gazette 115/16- 114/22)