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