Non-Moving Inventory: Finding and Clearing Dead Stock

Last updated: 16 October 2026

Quick Answer: Non-moving inventory is stock with no issue, consumption or sale for a company-set period, such as 365 days; receipts do not reset its age. Slow-moving stock still moves, but slowly. Age it from the last issue, consumption or sale, value it at the lower of cost and net realisable value, then reuse, return, sell or scrap it with approval.

Non-moving inventory is rarely one large mistake. It is a few hundred item codes that stopped moving one at a time: spares for a machine already sold, a part dropped after a design change, a bulk purchase taken for the discount.

For a manufacturer's finance head, the decision is which idle items to write down, which to sell or scrap, and who signs off each one. This guide ends with a review register your stores and finance teams can use as it stands.

How Does Non-Moving Stock Differ From Slow-Moving and Obsolete Stock?

Non-moving stock has had no issue, consumption or sale for the period your policy sets, and a new receipt does not reset that clock. Slow-moving stock still moves, but the quantity on hand would take far longer to use or sell than planned. Obsolete or dead stock is stock you no longer expect to use or sell at its cost, whatever its age.

No accounting standard or statute fixes the day count. Each company sets its own cut-offs by item type, because a spinning mill's critical spares and a dairy's printed film age at very different speeds.

Why Does Non-Moving Inventory Build Up in a Manufacturing Plant?

Dead stock often starts with a decision that made sense at the time. In the factories of Western Tamil Nadu, the usual reasons are:

• Engineering changes: a pump or motor assembler revises a design, and the old castings stay in the store with no run-out plan.
• Customer-specific stock: a foundry or garment unit holds material made for one buyer, and the order is cut.
• Retired machines: a spinning mill replaces a frame but keeps spares that nothing else in the plant can use.
• Bulk buying: a quantity discount brings in far more material than the six-month plan needed.
• Pack changes: a dairy changes its printed packaging, and the old film loses its value overnight.

What Does Non-Moving Inventory Cost a Manufacturer?

The visible cost is cash locked in stock that earns nothing, often funded by a working capital limit that does carry interest. Behind it sit storage space, insurance, handling, the effort of counting idle items every year, and deterioration of rubber, chemicals, electronics and printed material. Dead stock also inflates inventory days and hides the true margin until a large write-down arrives at once.

How Do You Identify Slow-Moving Inventory in Your Records?

Build the ageing report on the last issue, consumption or sale date of each item. A fresh receipt does not reset that date, because it does not prove the item is being used. Sort the report into age bands, value each band at cost and track two ratios over time:

• Inventory turnover: cost of goods sold for the period divided by average inventory at cost.
• Days of inventory: 365 divided by the inventory turnover ratio for the year, or for one item, stock on hand divided by average daily use.

Most ERP systems hold a slow or non-moving materials report. Someone still has to confirm the dates and include stock in transit or at job workers.

FSN Analysis in Inventory Management: Fast, Slow and Non-Moving

FSN analysis ranks every item by how often and how much it is issued over a fixed window, commonly the last 12 months. Fast-moving items are issued regularly, slow-moving items occasionally and non-moving items not at all. The output is a working list for planners and buyers, not an accounting entry.

Combining FSN With ABC, XYZ and Criticality

ABC adds the value each item holds, and XYZ adds how steady its demand is. A non-moving item in class A deserves attention first. Critical machine spares, often graded vital, essential or desirable, may be slow by design and are kept once engineering confirms the need.

How Is Non-Moving Inventory Valued Under AS 2 and Ind AS 2?

Both standards carry stock at the lower of cost and net realisable value, so a dead item stays at cost only while it can still realise that amount. AS 2 values inventories at the lower of cost and net realisable value, meaning the expected selling price less the costs to complete and sell. For each flagged item, answer four questions:

1. What will it realise? Use the most reliable evidence available: recent sales, supplier buy-back offers or scrap bids. Price changes after the balance sheet date count only where they confirm conditions existing at that date.
2. Is it a production material? Materials held for production are not written down below cost while the finished products they go into are expected to sell at or above cost. If a fall in material prices means those products will sell below cost, the materials are written down, and replacement cost may be the best measure of their net realisable value. Dead or obsolete material is written down to what it will fetch as goods or scrap, less the costs to sell it.
3. Is it damaged or obsolete? Damage, obsolescence and falling selling prices are the standard's own examples of cost that may not be recovered.
4. Is it judged item by item? Write-downs are made per item, or for closely related items of one product line, never across a whole class such as all finished goods.

Age bands decide which items to examine first; each write-down still rests on that item's evidence and is reassessed at every balance sheet date. Under Ind AS 2, a write-down is reversed when its cause no longer exists or net realisable value clearly rises because economic circumstances have changed, but never beyond the original write-down. The write-down, any reversal and the circumstances that led to the reversal are disclosed.

Recording the Write-Down in the Books

The write-down is charged to the statement of profit and loss in the period it arises. Many companies credit a provision for obsolete inventory, so the stock ledger keeps original cost until the goods leave. Illustrative example: components carried at ₹4.6 lakh will fetch ₹1.2 lakh as scrap, so ₹3.4 lakh is debited to loss on write-down of inventories and credited to that provision.

CARO 2020 and Schedule III Points on Inventory

Where it applies, CARO 2020 requires the auditor to report on management's physical verification of inventory, including discrepancies of 10% or more in the aggregate for a class. ICAI guidance on the Order expects sound procedures for spotting damaged and obsolete items, and Schedule III asks for the mode of valuation to be stated.

What Are the Options for Clearing Dead Stock?

Work through the options for idle stock in order of the value they recover, and record why each earlier option failed:

1. Use it elsewhere: an alternate product, a rework into a current part, or a transfer to another plant.
2. Return it: to the supplier, where the purchase terms allow.
3. Sell it as goods: to the original customer, another buyer, or at a discount or in a bundle.
4. Sell it as scrap: by tender or auction, with every bid kept on file.
5. Destroy it: where sale is unsafe or would misuse your brand, with a witnessed destruction note.

Approvals and the Paper Trail

A small disposal committee from stores, planning and finance approves each lot, with value limits that send larger lots to the CFO or the board. Each lot carries a reason code, its value at cost and at net realisable value, the bids received and the approval. The trail closes with the gate pass, invoice or destruction note and the ledger entry.

What Happens to GST Credit on Written-Off Stock?

Section 17(5)(h) of the CGST Act blocks input tax credit on goods lost, stolen, destroyed, written off, or given away as gifts or free samples. Before booking a write-off or destruction, list the credit taken on those items and settle the position with your GST adviser. A sale at a discount or as scrap is invoiced like any other sale.

Non-Moving Inventory Review Register: Columns and Actions

Keep one register for every review, so each item's history, value and decision sit together. These are the minimum columns:

The bands below are illustrative; set your own by item class in the inventory policy.

How to Reduce Non-Moving Inventory and Stop It Returning

Preventing dead stock is a job for the purchase and planning routine, not the year-end review:

• Show stock on hand and the last issue date on every purchase requisition.
• Review minimum, maximum and reorder levels each quarter for slow movers.
• Require a run-out plan for old parts in every engineering change note.
• Hold customer-specific stock only against a written commitment from the customer.
• Put the ageing summary, with the top items by value, into the monthly MIS.

Storage discipline matters too: items with no bin location, unbooked returns and material at job workers age unseen. The warehouse audit checklist covers those receiving, bin and storage checks.

Who Can Review Non-Moving Inventory for Your Company?

The monthly ageing review belongs to stores, planning and finance. An outside review helps when write-downs are large, the same items return every year, or the statutory auditor has raised inventory points. The choices are your internal audit team, an outside internal audit or stock verification firm, or your ERP partner for report set-up. Items flagged here are checked again at the count under the inventory audit procedure.

Astral Business Consulting LLP, a Coimbatore-based management consulting and audit firm, is one such option through its Cycle Count division. Its physical and warehouse stock verification services compare inventory records with physical stock at warehouses, third-party locations and work in progress. Inventory management is also one of the cycles Astral Business Consulting covers in its process-based internal audit.

Planning a Review of Your Dead Stock?

To scope a stock verification of your plants, or an internal audit of inventory management, talk to the Cycle Count division of Astral Business Consulting LLP.