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6.8 Luxembourg Retail/Hospitality Inventory Accounting (PCN Class 3)

PCN Class 3: Inventory Accounts​

Class 3 contains all inventory-related accounts according to PCN 2020.

Account Ranges:

  • 300000-309999: Raw Materials (Matières Premières)
  • 310000-319999: Work in Progress (En Cours de Fabrication)
  • 320000-329999: Finished Goods (Produits Finis)
  • 321000: Merchandise (Marchandises)

Inventory Accounts for Different Business Types​

Retail Businesses​

Primary Account:

  • 321000: Merchandise (Marchandises)

Usage:

  • All goods held for sale
  • Purchased finished goods
  • Ready to sell to customers

Example: Clothing store inventory

321000 Merchandise                €25,000

Restaurants/Hospitality​

Food Ingredients:

  • 300000: Raw Materials (for ingredients to be prepared)
  • Or 321000: Merchandise (if treated as merchandise)

Retail Items:

  • 321000: Merchandise (wine, coffee beans, merchandise for sale)

Example: Restaurant with both

300000 Raw Materials (Food)         €5,000
321000 Merchandise (Wine, Retail)   €3,000

Manufacturing Businesses​

Raw Materials:

  • 300000: Raw Materials

Work in Progress:

  • 310000: Work in Progress

Finished Goods:

  • 320000: Finished Goods

Inventory Valuation Methods​

Luxembourg allows:

  • FIFO (First-In, First-Out)
  • Weighted Average
  • Specific Identification (for unique items)

Luxembourg Requirement:

  • Must use consistent method
  • Must be disclosed in notes to financial statements
  • Must be reasonable and supportable

Inventory Cost Components​

Inventory cost includes:

  • Purchase price
  • Freight-in
  • Import duties (if applicable)
  • Other costs to get inventory ready for sale

Does NOT include:

  • Selling expenses
  • Administrative expenses
  • Storage costs (unless necessary for sale)

Luxembourg VAT and Inventory​

VAT Treatment:

  • Inventory recorded at net cost (excluding VAT)
  • VAT Recoverable (431000) recorded separately
  • VAT on sales recorded as VAT Payable (430000)
  • Different VAT rates require separate tracking

Example: Mixed Inventory

Restaurant inventory:

  • Food ingredients (3% VAT): €1,000 net
  • Wine (14% VAT): €500 net
  • Equipment/supplies (17% VAT): €200 net

Recording:

321000 Inventory - Food             €1,000
321000 Inventory - Beverages         500
321000 Inventory - Supplies          200
431000 VAT Recoverable               103  (€30 + €70 + €34)
400000 Accounts Payable                          €1,803

Inventory Management​

Best Practices:

  • Regular inventory counts (even with perpetual system)
  • Proper documentation
  • Secure storage
  • Rotation (FIFO for perishables)
  • Monitoring for theft or spoilage

Luxembourg Compliance Note​

For inventory in Luxembourg:

  • Must use PCN Class 3 accounts
  • Must value inventory properly
  • Must use consistent valuation method
  • Must be disclosed in financial statements
  • Must support inventory values with documentation
  • Must comply with VAT requirements

Think It Through​

A Luxembourg restaurant purchases food ingredients (to be cooked) and wine bottles (to be sold as retail). How should these be classified in PCN? What accounts should be used?