Archive about 'Stock Write Off and Provision'

Perpetual Inventory System And Types of Physical Stocktaking

Tweet PERPETUAL INVENTORY SYSTEM A method of controlling physical stock level by ensuring the amount of stock level of every item could be accounted at all times. This normally involves detailed recording of all receipts, issues and running balances for each item of stock. Due to the detailed recording of all in and out, management […]

Effects Of Incorrect Stock Valuation On Profit For The Current And Subsequent Periods (Part 9)

Tweet In the earlier article, any overstatement of the closing stock valuation will lead to an overstatement of the gross profit and consequently the net profit for the CURRENT period. The next thing we need to understand is that the closing stock of one period is the opening stock for the subsequent period. So, what […]

The Importance Of Correct Stock Valuation as it has great impact On Gross Margin,Net Income , Asset Valuation And Capital of a business(Part 8)

Tweet It is important to understand the reason for the need to have correct valuation of stock. Simply, any incorrect stock valuation will have direct impact on the gross margin of an enterprise leading right down to the bottom-line which is the net income/profit of an enterprise. As the closing stock is in the current […]

Accounting For Stock: Valuation of Stock At The Lower Of Cost & Net Realizable Value ( Part 7)

Tweet The usual accounting basis for stock valuation is the LOWER of cost & Net realizable value.   What is cost? Cost as mentioned in my other article is the price that the enterprise has paid the suppliers to acquire the goods (historical cost concept)   Whilst, Net Realisable Value (NRV) is the total received from sales […]

Accounting Treatment For Increase or (Decrease) of Provision For Stock Obsolescence(Part 6)

Tweet INCREASE IN PROVISION FOR STOCK OBSOLESCENCE: Assuming a provision for Stock Obsolescence of $100,000 is created at Quarter 1. At end of Quarter 2, you have re-done the provision and noted that you need increase a further amount of $50,000. How should we treat this increase in provision? For Quarter, Let’s us have the […]

Different Methods of Creating Provision for Stock / Inventory Obsolescence (Part 5)

Tweet Like the provision for doubtful debts, the accounting for provision for stock obsolescence is almost similar. [please refer to my earlier article on stock written off] This article is to discuss the various methods of creating provision for stock obsolescence METHOD 1: GENERAL PROVISION BASED ON AS % OF CLOSING STOCK BALANCE This methodology […]

Accounting For Stock: Purchases Of Goods & Its Associated Costs (Part 3)

Tweet In Part 2, we have learned about the purchases account. When an enterprise purchases goods from the suppliers, besides the cost charged by the suppliers, we have other types of costs which are also part of the cost of the purchases of goods /services. OTHER TYPES OF COSTS OF PURCHASES COMPRISES: Transportation costs. Other […]

Accounting For Stock: What Is Cost Of Goods Sold And Methodology ( Part 2)

Tweet WHAT IS COST OF GOODS SOLD?   In Part 1, we understood what is stock and what stock stand for. These stock-in-trade or inventories are purchases of goods by a business for resale to the customers with the intention of earning a profit in the process. On the other hand, cost of goods sold […]

Accounting For Stock/Inventory: What Is Stock And Why Hold Stock ( Part 1)

Tweet WHAT IS STOCK/INVENTORY? Stock/Inventory forms part of the operating cycle of the business. The enterprise purchases stock from the supplier in raw material form, convert it into work in progress and finally finished goods for resale to customers. Stock/inventory is part of the Current Asset Category of the Balance Sheet. To define stock, it […]