closing stock for a small craft business

Monsoon

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?

coojee

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

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

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

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

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

Thanks both