FRA closing stock

System
System Posts: 100,534 🤖 Admin 🤖
edited 10:32AM in AAT student discussion
Does anyone remember the closing stock question that went something like this:

You have closing stock in your warehouse of £1,000, items that have been sold but still in warehouse waiting to be shipped of £200 and purchases in transit to your warehouse of £300.

Calculate closing stock.

I calculated the £1,000 + £300 to get £1,300. Is that correct?

Comments

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:FRA closing stock

    I believe that the closing stock value is obtained by completing a end of year stock check. Therefore, I only included the stock actually on site at the time of the check - don't know if this would be correct though(?)
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:FRA closing stock

    I did the stock for sale minus stock to be delivered... But I really did not understand this question ????
    :cry:
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:FRA closing stock

    I was concerned about that question aswell and i did the same as you. When i got home i checked in my text book and i was right!!!! :D
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:FRA closing stock

    I had a little difficulty with this question, but I used the stock physically in the warehouse; goods in the warehouse and goods sold but not yet despatched. I didn't include the goods in transit.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:FRA closing stock

    I did the same i think. Came up with something along the lines of £2100.
    This question did confuse me - possibly the only question in section one that did.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:FRA closing stock

    I think I got 2100 as well. I didn't seem to have any problems with section 1 either. Section 2 was going ok until I got to the appropriation account. the wording seemed to throw me a bit,did any1 else have that problem?
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:FRA closing stock

    Same, here. I hope that's the right answer.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:FRA closing stock

    LOL it's good to know the general consensus is what we did was correct! Fingers crossed for the results guys! Good luck to everyone.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:FRA closing stock

    In my opinion closing stock should be only 1980, because 120 is the value of stock sold and not collected (I think that stock sold has to be included in purchases at cost so accrual concept can be met - all costs and revenues have to match to the same product and period. If we add it up to closing stock we understate the cost of sales and overstate the net profit). I am not sure about it, but this is the way I tried to explained myself that problem on the exam. Maybe somebody thinks the same?
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:FRA closing stock

    I barely remember this now - soooo long ago!!!

    I thought the goods sold would have been accounted for as sales, therefore, whether it was in the warehouse or not, it is not stock but goods SOLD.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:FRA closing stock

    JUST NOTICED THE QUESTION PAPERS ARE NOW ON LINE. AND SEEING THE QUESTION AGAIN I REMEMBER MY ANSWER.

    STOCK FOR SALE £1980.
    STOCK IN SALES BUT NOT DISPATCHED £90, ignore otherwise you double account.
    STOCK PAID FOR INCULDE £120.
    Total £2100.

    OTHERWISE YOU WOULD BE DOUBLE ACCOUNTING.

    REMEMBER IF YOU HAVE PAID FOR THE STOCK EVEN IF YOU HAE NOT RECEIVED IT IS STILL YOURS. AND IF YOU HAVE SOLD THE STOCK IT IS NOT YOURS. IF YOU INCLUDE SOLD STOCK IN YOU CLOSING STOCK FIGURE THEN YOU ARE OVERSTATING THE VALUE OF YOUR CLOSING STOCK AND THUS UNDERSTATING THE COST OF GOODS SOLD.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:FRA closing stock

    Hi Pturner

    that sounds like the figure I got too!
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:FRA closing stock

    I agree with you. I put the same thing down.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:FRA closing stock

    excellent

    I thought goods in transit only related to intercompany accounts, and this was my reasoning for calculating the figure the way i did !



    fingers crossed............
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:FRA closing stock

    Shouldn't the stock be £2,100?

    £1,980 (stock for sale) plus £120 (stock paid for but not received). Since you have already bought the stock, it will already be included within purchases (as an expense, on the P&L), which also means that it should be included in the closing stock (as an asset, on the balance sheet). It does not matter that it has not been received.

    The £90 stock that was not yet despatched to customers should not be included because it has been sold and will therefore be included as part of sales. So, if you have sold the stock, and have counted it as part of sales then you should not include it in the closing stock figure - otherwise you would be showing the sale as revenue but also counting the stock as yours too.

    Hope that explains it better?
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:FRA closing stock

    so confused on this one - now - don't know whether I'm coming or going - can't remember now what I put !!

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