Accounting For Stock Loss

November 25th, 2006 Comments off
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Stock Loss is simply the discrepancy/difference between actual physical stock value compared to book value of stock. Also see article on adjustments or reconciliation of discrepancies of physical stock take versus book figures.

Stock loss is normally incurred when stock is lost in a fire or stolen/pilferage.

Accounting Treatment of Stock Loss:

Computation of Stock Loss Figure:

Opening stock                       $X

Add: Purchase                       $X

Goods Available for sale         $X

Less: Cost of sales              ($X)

Closing Stock                       $X

Less:Physical stock value     ($X)

Stock Loss value                  $X

Formula:

(i) Margin = Gross Profit/ Sales x 100%

(ii) Mark-up = Gross Profit/Cost of Sales x 100%

(iii) Gross Profit = Gross Profit/Cost of Sales x 100%

Illustration:

Question:

Mr. A is a sole proprietor and on 31 st December 2005, he valued his stock at cost as $69,500.

On 27 th January 2006, his shop was broken into and his stock was stolen with the exception of goods valued at cost at $10,450

The following details are given:

(a)  purchases received from 1 to 27 January 2006 amounted to $31,500 at cost price

(b) sales during the same period amounted to $50,600 and all these goods has been delivered before the break-in.

(c) gross profit amounts to 20% of sales

Compute the stock loss value at cost price of the goods actually stolen.

Solution:

Mr A

Computation of cost price of Goods actually stolen.

Stock at cost before stolen      $69,500

Add: Purchases at cost           $31,500

$101,000

Less: Cost of goods sold ($50,600 x 80%) ($40,480)

Original/Actual closing stock valuation         $60,520

Less: Stock not stolen at cost                   ($10,450)

Cost of stock loss                                     $50,070

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Financial Accounting

 
 

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