Stock items - expense / asset - The Book-keepers Forum (UK)

big_chief_hutch · Newbie

Stock items - expense / asset

ADAS · Guru

Hi Keith

The unsold items - flowers,beads,sprays etc form part of closing stock in the balance sheet. The logic being that the items are carried forward for sale in the next accounting year. The items will be already included in the p&l under purchases, assuming they were bought in the year. So you have to remove them from the p&l and into the balance sheet by

dr closing stock
cr purchases.

As for the glue guns and other small tools I would include them in the p&l during the year in which they are bought. Strictly speaking if they contribute to profits for more than one year then they are an asset. But because their value is so low as not to really impact on the profit, I wouldn't bother capitalising them.

hth.

StuartAnder · Senior Member

hi

Remember on an extended trial balance (not sure if you use one) but you will have 2 closing stock items (same amounts obviously) one for the BS and other for P&L (cost of sales calculation)

DR on BS
CR on P&L

Im sure you know anyway :)

big_chief_hutch · Newbie

I think I'm getting it

Opening stock on 1/1/11 was £728 and the closing stock at 31/12/11 was £624.

So I then journal as follows

1/1/11
DR Opening stock (5200) P&L £728
CR Stock (1001) BS £728

31/12/11
DR Stock (1001) P&L £624
CR Closing stock (5201) BS £624

This shows on P&L correctly for the Cost of Sales (Purchases + O/S - C/S)

But the Balance Sheet for year end does not appear to be correct for Stock (1001) as the £728 is still in there. Should there not be a journal entry such as DR Stock 1001, and would it have a CR journal entry against Suspense 9999? But would this not then appear on the P&L. I am getting well confused.

Keith

ADAS · Guru

Hi Keith

The last bit doesn't quite make sense. The closing balance on 31/12/10 would have been to

Dr 1001 B/s £728
Cr 5201 P&L £728

So you're first journal above on 1/1/11 would have cleared 1001 with the credit you need. At this point the Closing stock in the balance sheet would be nil.

I can't tell if it's a typo in your second journal or something is wrong with the way the accounts are set up but 1001 is a B/Sht account and 5201 a P&L a/c, not the other way around as you've stated.

You should end up with 3 entries in 1001

Dr 31.12.10 - £728

Cr 1.1.11 - £728

Dr 31.12.11 - £624

-- Edited by ADAS on Monday 30th of January 2012 08:03:55 AM

big_chief_hutch · Newbie

Tony

Many thanks for reply.

The second journal entry was a typo error on my part and should have been as you say

31/12/11
DR Stock (1001) BS £624
CR Closing stock (5201) P&L £624

In relation to Balance Sheet problem, having checked back the TB with Opening Balances I was given (different nominal acc codes than I use), I think I then entered the OB for stock into the wrong acc. I think I am right in saying it should be in the Stock 1001 and not O/S 5200?

The journal entry for 1/1/11 would then clear the Stock 1001 of the £728 on the B/S.

Keith