Accounting for stock

[Churchill]

Cheers for all the answers.

That's what my book said but I just could not believe it. Seemed wrong that something that had not been sold yet should appear as increased profit in the P&L sheet. But I geuss it must be right.

As for valuation at anything other than cost, that could be difficult. A CD can sell at £30 or £120. Depends on what site licence they go for. Similarly with printed materials, depends if goes to schools or retailers.

Surely you should be selling the license to use the software, not the software itself...

Therefore the CDs themselves would have a standard "vannilla" cost...

[Mindomoo]

in that case..........

You're best bet is to do what the large co's do

Add up the cost price of each similar item of stock.

i.e. all cd's type A cost a total of £100

Then divide by the number of units you have.

So if you have 10 CD's they are £10 each and as you sell them, that what you book them out at.

Called moving average price.

[xoggoth]

Cheers for all the answers.

That's what my book said but I just could not believe it. Seemed wrong that something that had not been sold yet should appear as increased profit in the P&L sheet. But I geuss it must be right.

As for valuation at anything other than cost, that could be difficult. A CD can sell at £30 or £120. Depends on what site licence they go for. Similarly with printed materials, depends if goes to schools or retailers.

[Bradley]

Re: WIP

Know it's valued at lower of cost or selling

Not always if you're talking about services rendered over a period of time. In that scenario you could have to account for the expected sales value. Is that the case?

[Darren@UptonAccountants]

Stock

Know it's valued at lower of cost or selling but not sure where/how value of stock actually appears in company accounts. Got a little book but it don't make much sense to me.

Cheers for any info.

Appears as a current asset on the balance sheet, but also as an adjustment in your cost of sales...i.e. dr Stock (balance Sheets), cr Stock (Profit & Loss).

It will increase your current assets but also your net profit in the accounts. You also need to include a note in the accounting policies section of your accounts on the company's policy of valueing stock...if you need a standard note send an email.

[Mindomoo]

Stock........

Usually appears in the balance sheet and as an element of current assets. When acquired the entry is, in simple terms:

Dr Stock
Cr Vendor

When it is used it is:

Dr Expense line in the P&K (often in COGS)
Cr Stock

It is only valued as lower of cost and sale price if revalued for a stock take. Generally most companies operate a moving average cost of stock.

If you want more accounting drivel, PM me

[xoggoth]

Know it's valued at lower of cost or selling but not sure where/how value of stock actually appears in company accounts. Got a little book but it don't make much sense to me.

Cheers for any info.