Stock variation: how to read and record it

Stock variation is the difference between opening and closing inventory for the period. Under French GAAP it is recorded at the closing date in accounts 603 for purchased supplies and merchandise, and 713 for work in progress and manufactured products. Only two valuation methods are allowed for interchangeable items: weighted average cost and FIFO. LIFO is prohibited in France.

Stock variation directly influences how consumption, margin and operational performance are read. In 2026, it is both a year-end closing line and an indicator of operational control quality. Understanding it correctly, and recording it accurately, matters both for financial reporting and for management decision-making.

Stock variation measures the difference between the opening stock (inventory at the start of the period) and the closing stock (inventory at the end of the period), allowing a more accurate reading of:

• actual consumption: if purchases are recorded on an accruals basis but stock has increased, the actual consumption is lower than the purchase figure suggests: the closing stock has absorbed part of the expense;
• true gross margin: the correct cost of goods sold (or consumed) depends on adjusting for stock movements: a margin calculation that ignores stock variation produces a misleading profitability picture;
• produced or destocked production: in manufacturing or production contexts, stock variation also captures the change in work-in-progress and finished goods inventory;
• inventory anomalies: unexplained or unexpected stock variations can signal inventory management problems, theft, waste, obsolete stock or counting errors.

A poorly measured stock variation corrupts several downstream accounting outputs:

• the operating result is directly affected: overstated closing stock reduces consumption and inflates profit; understated closing stock does the reverse;
• the gross margin becomes unreliable if stock variation is not correctly applied to cost of goods sold;
• the activity analysis loses coherence: decisions based on margin data that does not reflect actual consumption lead to wrong pricing, purchasing and production conclusions;
• the audit and compliance risk increases: statutory auditors and tax inspections typically review inventory counting procedures and closing stock valuation as priority areas.

See also why accounting expertise is essential for restaurants, accounting process structure and accounting follow-up and controls.

Under the French general chart of accounts (plan comptable général, or PCG), stock variation is structured around specific accounts linking Class 3 (stock assets on the balance sheet) with Classes 6 and 7 (charges and products in the income statement).

Accounts 603: variation of stocks of supplies and merchandise#

These accounts record the variation of purchased goods stock and are broken down into three main sub-accounts:

• 6031: Variation of raw materials and supplies stock (counterpart of account 31)
• 6032: Variation of other supplies stock (counterpart of account 32)
• 6037: Variation of merchandise stock (counterpart of account 37)

The balance of these accounts adjusts the corresponding purchases. A credit balance indicates a stock increase (purchases exceeding consumption), which reduces the period's charges. A debit balance indicates a stock decrease (consumption exceeding purchases), which increases charges.

Accounts 713: variation of work-in-progress and product stocks#

For manufacturing or craft businesses that produce goods, stock variation is recorded as income through accounts 713:

• 7133: Variation of work-in-progress for goods (counterpart of account 33)
• 7134: Variation of work-in-progress for services (counterpart of account 34)
• 7135: Variation of product stocks (counterpart of account 35). Finished goods are only sub-account 71355: account 7135 also covers intermediate products (71351) and residual products (71358)

Here the logic is reversed: an increase in manufactured product stock increases the period's production, because the company has created value that has not yet been sold.

The PCG defines this variation as the difference in value between the closing stock and the opening stock, before any impairment.

Mind the direction of reading. The usual formula, opening stock minus closing stock, reflects the expense convention of accounts 603, which are debited with the opening stock and credited with the closing stock. For accounts 713, stocked production reads the other way round: closing stock minus opening stock.

The choice of valuation method directly impacts the stock variation amount. For fungible, that is interchangeable, items, the PCG allows only two methods: weighted average cost (CUMP) and first in, first out (FIFO, PEPS in French), under its articles 213-34 and 214-26 and article L123-18 of the Commercial Code. Last in, first out (LIFO) is not accepted, neither by the PCG nor by the French tax authorities. Items that are not ordinarily fungible, and goods or services allocated to specific projects, are measured by specific identification of their individual costs (PCG, article 213-33).

FIFO (first in, first out)#

The FIFO method assumes that the first items entering stock are the first consumed or sold. During inflationary periods, this method tends to value outgoing items at older, usually lower costs. Closing stock is therefore valued at the most recent costs, which approximates market value.

This approach is particularly suited to perishable products or items subject to rapid obsolescence. IAS 2 also allows it, but gives it no preference: for ordinarily interchangeable items the standard places FIFO and weighted average cost on an equal footing, and it does not permit LIFO either.

Weighted average cost (CUMP)#

The CUMP smooths price fluctuations by calculating an average cost across all entries:

CUMP = (Opening stock value + Entry value) / (Opening stock quantity + Entry quantity)

This method, widely used in French SMEs, provides a stabilised view of cost prices. It limits the effects of one-off price fluctuations on the income statement and simplifies account reading. The CUMP is computed on each entry or over a period. The PCG caps that frequency: the period used may not exceed the average storage duration (article 213-34). A quarterly CUMP is therefore acceptable only if the average storage duration is at least one quarter.

Standard cost#

Some industrial companies use a predetermined standard cost with variance analysis at period end. Its status matters: standard cost and the retail method are not valuation methods ranking alongside weighted average cost and FIFO, but measurement techniques accepted for practical reasons, and only if they give results close to actual cost (PCG, article 213-35). They remain useful for internal management and require adjustments for general accounting purposes.

Whichever method is chosen, the PCG requires it to be applied consistently and permanently (article 121-5), and the same method must be used for all stocks of a similar nature and use (article 213-35). A change made at the company's own initiative is subject to a double condition (article 122-2) and must be disclosed and justified in the notes to the annual accounts (article 831-2).

What French GAAP accepts, and what it rules out:

Whichever method applies, the acquisition cost includes the purchase price, customs duties and other non-recoverable taxes, net of trade discounts, rebates and settlement discounts, plus transport, handling and other costs directly attributable to the acquisition (PCG, article 213-31).

Stock variation accounting entries occur during inventory operations at the close of each period. Two symmetrical entries are required.

Reversing the opening stock#

At the closing date, under the periodic inventory method, the opening stock is first cancelled by debiting the variation account and crediting the stock account:

• Debit 6031 (or 6037) / Credit 31 (or 37): opening stock amount

This entry reintegrates the opening stock as a charge, since it was recorded as an asset during the previous closing.

Recording the closing stock#

Still at the closing date, once the physical count has been performed, the closing stock is recorded:

• Debit 31 (or 37) / Credit 6031 (or 6037): closing stock amount

The net balance of account 603 then represents the period's stock variation. If closing stock exceeds opening stock, account 603 shows a credit balance that reduces charges. Otherwise, the debit balance increases the period's charges.

For production stock, entries are symmetrical but pass through accounts 713 as income, each stock account having its own counterpart: 33 with 7133, 34 with 7134, 35 with 7135. For work-in-progress on goods, the opening stock is reversed as Debit 7133 / Credit 33, and the closing stock recorded as Debit 33 / Credit 7133.

Stock variation has a direct and immediate impact on the accounting result and, consequently, on the company's taxable income.

An increase in raw materials or merchandise stock (credit balance on accounts 603) reduces the period's charges and mechanically increases taxable income. Conversely, a stock decrease (debit balance) increases charges and reduces the result.

For production stock, the effect is reversed: an increase in finished goods stock (credit balance on accounts 713) increases the period's production and therefore taxable income.

The French tax authorities pay particular attention to stock valuation during accounting verification audits. An abnormal stock variation, a valuation method changed without justification, or a physical inventory that is insufficiently documented are all areas of weakness. Unexplained inventory discrepancies may be reclassified as taxable income or omitted invoicing.

Several recurring errors distort the stock variation calculation and can have significant consequences.

Incomplete or inaccurate physical inventory. Partial counting, inconsistent units of measurement or misidentified products directly contaminate the closing stock valuation. The inventory must be exhaustive, conducted at a clear cut-off date and properly documented.

Lack of rigorous period cut-off. Deliveries received before closing but invoiced afterwards, or vice versa, must be allocated to the correct period. Without rigorous cut-off, stock variation includes operations that do not concern it.

Undocumented changes in valuation method. Switching from FIFO to CUMP (or vice versa) without justification in the notes constitutes an accounting irregularity. The tax authorities may challenge the results of the affected periods.

Confusing stock variation with impairment. Obsolete stock, or stock whose selling price and sales prospects no longer cover its entry cost, must be written down through an impairment entry (accounts 39, dépréciations des stocks et en-cours), separate from the stock variation itself: the balances of accounts 603 and 713 express the variation before any impairment. French GAAP does not use the IFRS notion of net realisable value: PCG article 214-22 refers to the selling price and sales prospects, and for tax purposes article 38-3 of the CGI values stock at cost, or at the closing market price where that price is lower.

Measuring that write-down is the harder part: which obsolescence indicators to retain, how to quantify the loss of value and what to keep on file if the tax authorities challenge the period. Our article on how to write down obsolete stock sets out the calculation, the entry in accounts 39 and the tax treatment of the charge.

Hayot Expertise advice: stock variation is not just a technical closing line. It often tells the story of how well the inventory process is managed: the quality of the physical count, the consistency of the valuation method and the discipline of the cut-off procedures. A company that tracks its stock variations month by month, not just at the annual closing, has a real advantage in managing purchases and anticipating cash flow pressures.

We recommend systematically checking four dimensions:

1. Physical inventory reliability: is the count exhaustive? Are units of measurement consistent? Are discrepancies between theoretical and physical stock analysed and justified?
2. The valuation method: is it applied consistently? Do entry costs include ancillary expenses (transport, customs, handling) in accordance with the PCG?
3. End-of-period cut-off: are in-transit deliveries allocated to the correct period? Are credits and returns properly accounted for?
4. The link between stock variation, purchases and margin: is the gross margin calculated after applying stock variation consistent with operational reality? Unexplained discrepancies should raise alarms.

We can help you make this line more reliable and connect it to your operational performance monitoring.

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In 2026, stock variation remains a key closing and steering line. When correctly calculated, it explains operational performance accurately. When incorrectly measured, it distorts it, consistently misleading management decisions across pricing, purchasing and profitability analysis. Between the demands of the tax authorities, the digitalisation of accounting tools and the need for reliable financial data, companies have every interest in treating this subject with rigour throughout the period, not just at the annual inventory.