Trading houses along the Japan Sea coast often close their books while containers are still at sea or waiting for customs clearance in Niigata. Cut-off errors here are rarely dramatic, but they quietly distort both revenue and inventory.
FOB versus destination terms
We start by reading the actual sales contracts, not the invoice footer. If title passes when goods leave the warehouse, revenue may belong in the current year even though the customer has not yet unloaded. Destination terms push recognition later. Mixing the two without a schedule of open shipments is a common source of adjusting entries.
Three documents we always request
- The open shipment list as of the fiscal year-end date
- Bills of lading or warehouse receipts for the five largest open lots
- The first five sales invoices issued after year-end
Matching these three usually reveals whether revenue was booked early or inventory left the warehouse without a corresponding cost entry.
Purchases arriving after the count
Inbound goods received in the first week of the new year often relate to purchase orders dated before year-end. If the count omitted goods in transit that the company already owns, inventory and payables are both understated. We ask the warehouse supervisor—not only the accounting clerk—whether any trucks arrived with prior-year paperwork.
A modest reservation from practice
Perfect cut-off documentation is rare in mid-sized trading firms. What matters is a repeatable process: a dated open-shipment list, clear Incoterms on major contracts, and a habit of comparing post-year-end invoices to that list before the books lock.