A stock statement is a periodic declaration a borrower gives its bank, listing stock, and usually book debts, as at a date. The bank uses it to work out drawing power on a cash credit or overdraft account. When a CA is asked to certify one, the real task is to check that the numbers agree with the books and with each other, and to say clearly what was and was not examined.
Last reviewed: 17 October 2026. Facts checked. We opened web search results on stock statements and drawing power, mostly commercial CA-firm and finance explainer pages, which we treat as indicative only. We could not open any RBI master circular, any bank's sanction terms or a bank's prescribed format. Margins, frequency and the age limit for statements vary by bank and sanction; none are stated as rules here. One source says statements older than three months can make the account irregular, but we could not verify that against RBI text, so do not rely on it. Always follow the sanction letter and the bank's format.
What the statement holds
Typically it lists raw material, work in progress, finished goods and stores, then trade receivables, often with ageing, and deducts creditors for goods where the sanction terms ask for it. Banks apply margins to arrive at drawing power, which is capped at the sanctioned limit. The mechanics are in our drawing power guide, and the free drawing power calculator lets you test scenarios.
Frequency is set by the bank. Sources describe monthly submission as common and quarterly as another pattern.
What the CA is really asked to do
Banks may ask for the statement to be certified or accompanied by a CA certificate. Be exact about the engagement. A certificate that the statement "agrees with books of account" is a limited reconciliation. It is not a stock audit, which is separate; compare in bank stock audit vs inventory observation.
Checks before signing
- Agree to the books. Total stock and debtors tie to the ledger or trial balance for the same date. If the statement is as at a month end and books are not yet closed, say so.
- Stock composition. Raw material, WIP and finished goods match the stock register or ERP. Ask how WIP was valued.
- Valuation basis. The statement should use the basis in the books, usually cost or net realisable value, whichever is lower. A mismatch between the books and the bank statement inflates drawing power.
- Ineligible items. Check whether the sanction excludes items like old stock, stock in transit, stock with third parties, or debtors over a stated age. Make sure they are excluded or shown separately.
- Creditors. If the terms net off creditors, check that the creditor figure is complete, including unrecorded purchases near the date.
- Debtors ageing. Agree the ageing to the ledger and test a few old balances. Look for debtors who are related parties or whose balances are mostly credit notes.
- Pledge and charge. Confirm the stock is not also pledged elsewhere and check the register of charges.
- Consistency with other submissions. Compare with GST returns, the previous statement and the annual accounts. A large unexplained gap is a question for management.
- Insurance. Check cover is in force for the stock and the amount is adequate.
The statutory auditor may also see these statements in the audit: CARO 2020 asks about quarterly returns or statements filed with banks for borrowers with working capital limits above a stated amount and whether they agree with the books. The CARO 2020 guide covers the clause, and we did not confirm the exact threshold wording here.
Example
A packaging manufacturer submits a month-end statement showing stock of Rs 4.2 crore. The CA agrees it to the stock register, then spots that Rs 35 lakh of stock is goods sent to a job worker and recorded at the worker's premises. The sanction terms, as read by the CA, do not mention third-party stock. The CA discloses the amount separately in the certificate and asks management to check the bank's position before it is counted for drawing power.
The figures are illustrative.
What the certificate should say
- The date and the documents examined.
- Whether the work was verification to books or something wider.
- Exceptions or limitations in plain words.
- Basis for valuation as stated by management.
- Disclaimer on physical existence if no count was observed.
Avoid wording that implies a stock audit when none was done.
Common problems
- Signing a template with a pre-filled total.
- Not noticing that the same stock appears in two statements to two lenders.
- Certifying figures from an interim ledger that later changes.
- No file note on what was checked.
Frequently Asked Questions
Is a stock statement mandatory?
It is a condition of working capital facilities set by the bank. Check the sanction.
Does the CA certify physical stock?
Only if the engagement includes observation. A books-based certificate does not confirm physical existence.
How often is it submitted?
Per the sanction terms; monthly and quarterly are both described by sources.
What if the statement and books differ?
Reconcile, explain, and tell the bank if the statement was wrong.
Related Articles
Statutory facts on this page are checked against their sources, and the page says where it relied on secondary reporting. How we verify · Report an error