Why the bank relies on it
Drawing power is typically the value of eligible stock and receivables, less creditors for those goods, less the margin the bank keeps. An overstated statement lets a business draw more than its assets support — which is exactly what stock audits and credit reviews are designed to catch.
Certification gives the bank comfort that the figures come from the books, that stock is valued properly, and that old or doubtful debts are excluded. The certificate is only as reliable as the checks behind it, so we do those checks rather than signing a statement the client has prepared.
Documents required
- Stock register or inventory report as on the statement date, with quantities and rates.
- Debtors ledger with invoice-wise ageing.
- Creditors ledger for goods.
- The bank's sanction letter, showing the margins and the ageing cut-off for receivables.
- GST returns for the period, for reconciliation.
- The bank's statement format.
How we certify it
Read the sanction terms
Margins, the receivables cut-off, and any items the bank excludes.
Check stock
Quantities to the stock records, with test checks where we can visit; valuation at the lower of cost and net realisable value.
Age the receivables
Invoice-wise ageing, with debts beyond the cut-off and doubtful debts excluded.
Reconcile
Stock, debtors and creditors with the books and sales with GST returns.
Certify
The statement is signed with a UDIN, with any qualifications stated plainly.
Practical notes from our engagements
- Slow-moving stock valued at cost. Stock that hasn't moved in months often isn't worth cost. Valuing it at cost overstates drawing power.
- Related-party receivables included. Many banks exclude dues from group concerns. Check the sanction letter.
- Statement figures that don't match the balance sheet. At year end, the stock in the March statement should reconcile with the audited accounts.
How we handle stock statement certification
We check the figures against the books and the sanction terms before certifying, and flag differences early so they don't surface first in a stock audit. Every certificate we issue carries a UDIN — the Unique Document Identification Number ICAI has required on certificates signed by practising Chartered Accountants since 2019. The recipient can check it at udin.icai.org.
Related services
Frequently asked questions
What is drawing power?
The amount of a working capital limit that can actually be used at a point in time — broadly, eligible stock and receivables, less creditors for goods and the bank's margin.
How often does the stock statement need CA certification?
As the sanction letter says. Monthly statements are common; certification is often required quarterly or half-yearly, and banks may ask more often.
Are old receivables included?
Usually not beyond the cut-off in the sanction letter. Debts older than that, and doubtful debts, are excluded from drawing power.
How is stock valued?
At the lower of cost and net realisable value, consistent with the method used in the accounts.
Is this the same as a stock audit?
No. A stock audit is a separate, more detailed review usually commissioned by the bank. Certification confirms the periodic statement.