Closing Stock

System
System Posts: 100,534 🤖 Admin 🤖
edited June 9 in AAT member discussion
I have been asked to prepare a set of Management Accounts for the underwriters of a very big supplier, approx 800k per year. The accountants wont have the final set of accounts yet for months. The system we use is an integrated process that automatically deals with stock at POS. When I look at the TB at the year end, there is a BS entry for stock only, none in the Trading P&L. I presume that this has something to do with the fact that this is a rolling figure and is amended at each sale and purchase. We did prepare a final stock check and this is now with the GM who adjusts this figure to account for obscalesent stock, damaged returns and bulk credits. Could anyone confirm that all I have to do is debit/credit the BS with the difference between the systems stock value and the actual value and debit/credit the P&L accordingly? I would really appreciate some help as I dont want to look an idiot if I put the wrong thing down.
Thanks,
Anne Marie

Comments

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Closing Stock

    The adjusting entries would be to:

    Debit the P & L - Trading account
    Credit the Balance Sheet


    That will reverse your opening position.

    Then to enter your closing stock you would:

    Debit the Balance Sheet
    Credit the P & L - Trading account

    Hope that helps.

    Regards

    Dean
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Closing Stock

    Thank you Dean, I do appreciate your help. The figure in the BS is the closing stock figure that the system has computed. This has to be adjusted to reflect the NRV. There is nothing in the system for the original opening balance. This is why I am getting confused as I need to have the original opening balance in the Trading P&L and then adjust for actual NRV closing stock in the balance sheet and then enter the actual NRV c/stock in the P&L. I cant seem to get my head around how to balance the journal entries. I agree with the first entry you said, Dr P&L, Cr BS Opening stock, but as there is already an incorrect figure in the BS I will be left with a difference, I think, between the actual closing stock and the amount the system has calculated sitting in the BS, or am I getting my self muddled? I need stronger HRT. And a campari and soda.

    Anne Marie
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Closing Stock

    I'm not sure how your system works but I would of thought that the balance currently on the balance sheet would be the closing stock figure for the previous year?

    Are you saying that you have a continual stock system in place? Therefore the balance of stock is constantly being adjusted for goods inwards and goods outwards?

    Regards

    Dean
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Closing Stock

    Thanks Dean,yes it is a continual stock system. This is why I am unsure as to how to proceed because this figure needs adjusting. I cant get my head around the journals.
    Anne Marie
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Closing Stock

    Ok so what are the balances at present. i.e

    P & L - Trading Account

    Opening stock £???
    Closing stock £???

    Balance Sheet

    Stock £???

    Regards

    Dean
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Closing Stock

    P&L, no entries at all
    BS, 567404.31 Debit. This figure needs adjusting to account for obsalescent stock etc. I would presume the actual to be around 450000.00
    Dean I really appreciate your help.
    Anne Marie
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Closing Stock

    So you have a figure on the Balance Sheet, Debit balance, which is correct.

    For you to have this balance you must have an opposit entry i.e the Credit entry. This figure is normally the closing stock in the P & L account. Have a look to see if you can see it else where because obviously its not where it should be at present. Maybe you have a holding account?

    As far as the opening entry is concerned all you will have to do there is post last years closing stock. i.e reverse the entries.

    You might also find that your figure of £56,704.31 includes last years closing stock?

    Regards

    Dean
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Closing Stock

    Is it in the purchases or is there a cost of sales account?

    Can you look back to see where the alternate entry goes?

    Annette
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Closing Stock

    No Dean, there is no corresponding credit on the P&L at all. The final dr balance in the BS is the value of stock computed by the system at the year end.
    This sytem is not the easiest to understand. When we installed it 4 years ago we weren't properly trained and we tended to flounder around until we had a better understanding. The USP of this system was that it was specifically designed for a SME Electrical retailer and could deal with inter-location branch stock transfers.
    I think I may have to credit CY profit to remove the incorrect stock figure from the BS and then just post journals to show opening and correct final stock as per your original suggestion. What do you think?
    Anne Marie
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Closing Stock

    I think you may have something Annette. I shall check the purchases.
    Anne Marie
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Closing Stock

    The credit entry will definetly be there somewhere or the TB won't balance.

    Regards

    Dean
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Closing Stock

    Thanks very much Annette and Dean. You have been brilliant.
    Anne Marie

Categories

Privacy Policy