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Jan 1 Physical Inventory


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Just a quick check list of things distilleries should record Jan 1:

Take a complete physical inventory on or after January 1 (but before January operations start) including:

- Production, Storage, and Processing Tanks (list Tank name, Account, Spirit Type, Total Proof Gallons, True Proof + any gauging calculations)

- Barrels (Counts by fill date, size, spirit types, entry proof, and Original Proof Gallons)

- Finished cases (Counts by product type, bottle proof, with Proof Gallons/case)

Sum up the total Proof Gallons in each of the 3 accounts. Compare the total Proof Gallons in house to what your End of Month December TTB Reports would show. 

If there are discrepancies, start the research to reconcile and/or make correcting Gains or Losses.

You can actually do this exercise at the beginning of any month to compare how many Proof Gallons you have in-bond versus what you are reporting.

If you have significant discrepancies, feel free to give me a shout for a possible on-site clean up. Donald@whiskeyresources.com 

Also, consider registering for Whiskey Systems to make 2017 the year you are in full TTB compliance!


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  • 3 weeks later...

The above is good advice.  I'm a bit late, but will offer a couple comments.

On the issue of discrepancies.  If I were auditing your accounts and did not find discrepancies between the book and physical inventory I would become very suspicious that you are not making the required gauges.  Stuff disappears in lines, evaporates, errors get made on gauges, etc. so that everything coming out spot on is very unlikely.  That said, you have to determine what your tolerance is for losses.   Do pursue those that are too large.

I'll underline the fact that you do not inventory spirits in barrels.  You take your losses there only when you empty the barrel and record and report the angels share on the monthly reports of storage and processing operations.

Any spirits in the production account are spirits that have not been recorded as produced, i.e., tanks holding heads or tails and any hearts from the stripping run.  They are reported as spirits in process, line 17b, if I recall, of the operating report.  You only make an entry there quarterly.  Any finished spirits must be entered into storage or dumped into processing, not held in the production account.

Finally, remember that you must pay taxes on any shortages in the cased goods account.  Cased goods do not experience losses due to evaporation, etc.  Since you record accidental losses, TTB presumes that any shortages on inventory result from unreported removals and are taxable.

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