Treatment of Stock

System
System Posts: 100,537 🤖 Admin 🤖
edited June 9 in AAT member discussion
Hello,<BR><BR>My husband has just completed his first year of trading. I have completed a stock take, but I am unsure how to treat the value of this stock.<BR><BR>He buys in lots of ingrediants to make his products. The stock is 80% of ingrediants ready to be made into the product. Do I value the stock on the value we brought it in at.<BR><BR>Could somebody please advise me on this, Stock is not a strong skill of mine.<BR><BR>I look forward to your help.<BR><BR>Regards<BR><BR>Nina

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  • System
    System Posts: 100,537 🤖 Admin 🤖
    Treatment of Stock

    Stock value is usually calculated as " all costs incurred bringing items to their present location and condition"<BR><BR>This is usually the Purchase cost plus ' costs of conversion ' when applied to finished goods. <BR><BR>Purchase cost can include delivery, duty etc. Cost of conversion is defined as any other cost attributable to the conversion of stock from raw material to finished good. This can have directly attributable items and an element of overheads if it can be directly linked to the stock item.<BR><BR>In your case, you have the ingredient cost + labour, heat, light (for example) this form the basis of your finished goods valuation.<BR><BR>There is a small consideration in that stock has to be valued at the lower of ' cost or net realisable value' so basically if your stock is obsolete or unsaleable then its worth zero !<BR><BR>Hope this helps<BR><BR>
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Treatment of Stock

    Brillant!!<BR><BR>Thankyou very much for that, I will put it to practice.<BR><BR>Regards<BR><BR>Nina

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