closing stock for a small craft business

Monsoon
Monsoon FMAAT, AAT Licensed Accountant Posts: 4,071 ? ? ?
Posted this in the wrong forum yesterday, d'oh!

Manufacturing is not my strong point!

Client has a small business making craft things. It's a complete variety, so she has lots of miscellaneous fabric, beads, wood, random trinkets from charity shops etc, which she will eventually make into stock of some description.

Now, normally I would charge things like findings (misc consumables like clasps, clips, beads etc) to the P&L and not stocktake them, but would add to closing stock significant raw materials, and finished goods. Raw materials here are so random, it's hard to judge.

We're not talking mega-bucks here, but obviously the less that goes into closing stock the better.

Any thoughts?

Comments

  • coojee
    coojee Registered Posts: 794
    Monsoon wrote: »
    Posted this in the wrong forum yesterday, d'oh!

    Manufacturing is not my strong point!

    Client has a small business making craft things. It's a complete variety, so she has lots of miscellaneous fabric, beads, wood, random trinkets from charity shops etc, which she will eventually make into stock of some description.

    Now, normally I would charge things like findings (misc consumables like clasps, clips, beads etc) to the P&L and not stocktake them, but would add to closing stock significant raw materials, and finished goods. Raw materials here are so random, it's hard to judge.

    We're not talking mega-bucks here, but obviously the less that goes into closing stock the better.

    Any thoughts?

    I guess they have no net realisable value on their own so they should be valued at nil. They could have some value as a job lot so there may be an argument for valuing them that way but I'd be inclined not to bother.
  • Monsoon
    Monsoon FMAAT, AAT Licensed Accountant Posts: 4,071 ? ? ?
    Basic principles: lesser of cost and net realisable value.

    D'oh!

    Thanks Coojee. I missed that slightly important bit out when I was failing to see the wood for the trees.

    Cheers!
  • Fingersan
    Fingersan Registered Posts: 84 ? ? ?
    Hi Monsoon

    I would be inclined to ask the client for a valuation of just the finished goods (obviously at a cost price). As you say, the smaller the amount the better, but it would be sensible to include something. In my experience, these small 'crafty' outfits tend to make a gross loss without stock adjustments!!
  • coojee
    coojee Registered Posts: 794
    Monsoon wrote: »
    Basic principles: lesser of cost and net realisable value.

    D'oh!

    Thanks Coojee. I missed that slightly important bit out when I was failing to see the wood for the trees.

    Cheers!

    LOL, well I didn't like to say because I was sure you must have considered it already.....
  • Monsoon
    Monsoon FMAAT, AAT Licensed Accountant Posts: 4,071 ? ? ?
    Thanks Fingersan.

    Valuing finished stock at cost price is the easy bit. It's the raw materials that I was baking my noodle over, but coojee
    has fixed it for me :)

    Definitely a loss without closing stock - but a loss is good for tax purposes on other income :D

    Thanks both :D
Privacy Policy