Stocktake Valuation: Explain the Closing Inventory Figure
Start with the completed stock count, reconcile quantity differences and attach evidence for the value assigned to each item. Keep unit-cost calculations and damaged or obsolete stock notes separate from the count itself. Counting ten units tells you the quantity; it does not establish their tax value or explain a write-down.
What you’ll get from this guide: Prepare a closing-stock valuation file that can be traced to counts, costs and reviewed valuation choices.
- Resolve quantity and cut-off differences separately from valuation.
- Keep the evidence behind unit costs and condition adjustments.
- Record the chosen tax basis and any simplified-rule decision with the review.
Once the shelves have been counted, the accountant or tax agent needs to see how you valued what remains. Start with the count sheets and work through the differences.
Reconcile quantity differences first
Keep the signed count sheets, date, locations and person who counted. Compare the count with the stock ledger and investigate purchases, dispatches, returns and transfers around the count date. Identify stock owned by someone else or stock of yours held elsewhere.
Don't hide a quantity difference by changing a unit cost. A missing carton and an obsolete carton are different problems, even if both reduce a final figure.
Fictional completed count. Unit costs below are supplied inputs for a cost schedule; no GST treatment or write-down is assumed.
| Item | Ledger quantity | Counted quantity | Cost per unit | Count-based cost / review |
|---|---|---|---|---|
| Filter F10 | 50 | 48 | $12 | $576; investigate two-unit difference |
| Seal S20 | 30 | 30 | $4 | $120; quantity agrees |
| Old fitting O30 | 10 | 10 | $8 | $80; condition report required |
48 × $12 + 30 × $4 + 10 × $8 = $776. That is an unrevised cost schedule, not an approved closing tax value. The two missing filters represent $24 at the stated unit cost.
Support the valuation choice
The ATO's trading-stock valuation guidance describes cost price, market selling value and replacement value methods. Each needs its own evidence. A retail shelf price and a supplier invoice support different bases.
For a proposed cost value, retain the purchase and related cost evidence used in the calculation. For another proposed basis, record the source, date and why it supports the item concerned. Ask your tax agent to confirm the applicable treatment and any simplified trading-stock rules rather than assuming a small stock balance makes a count or adjustment unnecessary.
Keep damaged and obsolete stock visible
List affected items separately with condition photos, age, sale history and any disposal or clearance evidence. Don't assign a zero tax value because stock is old or inconvenient to store.
Give the agent the ordinary valuation and the proposed adjustment, with the reason for the difference. That preserves an explanation even when the reviewed figure differs from your first estimate.
Closing-stock valuation schedule
Copy the template, save a text file for offline use, or print this page with its examples and sources. Fill in your own copy and check it before relying on it.
Count date / location / person counting: Item Ledger quantity Counted quantity Ownership / cut-off notes Unit-cost evidence Proposed valuation basis Condition evidence Proposed value Reviewer decision Reconciliation to accounts: Opening value carried forward / source:
Connect the schedule to the accounts and next year
Reconcile the reviewed total to the accounts and retain the adjustment entries. Record who valued the stock and the basis, as described in the ATO's stock records guidance. Keep the closing figure with the next year's opening records.
Use the cost-of-goods-sold reconciliation to understand how stock movements affect the operating result. The balance-sheet guide explains where inventory appears in the accounts.
Key takeaways
- Resolve quantity and cut-off differences separately from valuation.
- Keep the evidence behind unit costs and condition adjustments.
- Record the chosen tax basis and any simplified-rule decision with the review.
Where to get help
Ask your bookkeeper about quantity reconciliation and your registered tax agent about valuation methods and tax adjustments. Browse the tax records hub for other year-end evidence files.
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General information only. This guide doesn't take your personal or business circumstances into account and isn't financial, legal or tax advice. Rates and thresholds change — check the official sources linked in this guide and get qualified advice where your circumstances require it.