Traders and distributors working on fine margins and fast-moving stock.
Because the business is buying and selling the same goods, the accounts are dominated by inventory, receivables and payables, and by the matching of purchases and sales within the right period.
Input tax credit depends on suppliers filing correctly. In a business with many small suppliers, the reconciliation between the books, the returns and the auto-drafted credit statement is a monthly discipline rather than a year-end exercise.
Accounting and reporting
- Inventory valuation, and identification of slow-moving or damaged stock
- Recognition of sales, returns, discounts and rebate schemes
- Gross margin analysis by product, customer or branch
- Reconciliation of supplier and customer balances, including long-outstanding items
- Working capital, credit periods and the cost of borrowing against stock
Regulatory
- GST registration across states, returns, and credit matching with supplier filings
- Tax deducted or collected at source on specified transactions, including on purchases above notified levels
- Payment timelines for dues to micro and small enterprises, which carry both disclosure and income-tax consequences
Internal controls
- Purchase-to-payment and order-to-cash controls
- Periodic stock counts and reconciliation to the records
- Credit approval, credit limits and monitoring of overdue receivables
- Review of bank and cash reconciliations
Questions that arise
- Do purchase and sales records reconcile with the GST returns filed?
- Are old receivables and payables reviewed for recoverability and for disputes?
- Are dues to micro and small enterprises tracked against the statutory payment timelines?
- Is stock held on consignment or with third parties separately identified?