Lost/Damaged Stock

T.C. Registered, Tutor Posts: 1,448
How do I account for stock purchased, which was found to be unsuitable for sale?
My client purchased £4,000 of ink cartridges and 3 dvd players (from different suppliers). All these ones were faulty but they would not accept returns - don't ask me why!
He wants these to go in the accounts as lost stock - how would you put them in the books - damaged stock perhaps? - in cost of sales? :confused1:


  • Guest
    Guest Registered Posts: 73 💫 🐯 💫
    If the purchase invoice has gone through the records and the stock is valued excluding them (as there’s no realisable value) it is already reflected in the GP.

    Only if it made a significant difference to the GPM would I consider noting away from the COGS. It would also possibly bring a Revenue question by noting separately.
  • T.C.
    T.C. Registered, Tutor Posts: 1,448
    This is an awkward one, because if I include it all in cost of sales, then the gross profit is a significant loss and this will ring alarm bells in itself! Any ideas?
  • deanshepherd
    deanshepherd Registered Posts: 1,809
    Assuming it's a sole-trader then it doesn't really matter where you put it.

    If you do not want it to go in COS then put an extra expense code in the accounts as 'Loss on damaged stock'. I would probably bundle it up in administration costs on the tax return.

    If it's a company then you can't really hide it anywhere. HMRC will see the detailed P&L anyway.
  • Poodle
    Poodle Registered Posts: 711
    I agree with Dean S in debiting a written off stock (or whatever you want to call it) line, below GP.

    If ever I get a situation where ratio's are really different from a prior year, because of unusual events or even commercial events then I include details in the white box on the tax return.

    If this is a genuine situation then why hide it

  • T.C.
    T.C. Registered, Tutor Posts: 1,448
    Basically, this is the first year of trading for the small self-employed business and he has takings recorded at approximately £9,000 and cost of sales at £15,000 - won't it raise the alarm bells like that?
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