Goods taken from inventory for own use

Hi, we are a partnership of two self employed partners. We sometimes take goods out of inventory for own use.
Can we account for these goods at cost price or we should use the sales price?

Thank you.

Hi @Laszlo_Todoran

I done a quick search and come across this page which may help:

However, I’m not an accountant so I would recommend asking yours just to be sure it’s recorded correctly.

Thank you for your quick answer, I’ll read this article.

You have two options

  1. Do nothing
    It will flush out when you do yearly closing stock taking
  2. if you really want to document things which is good idea, you can do journal as follows at cost
    Dr Drawings
    Cr Purchases

My accountant advised me to do it at cost, but remember if the partnership is VAT registered you have to account for VAT on these goods. The way I deal with it is to keep a record of what I’ve taken out and then at the end of each month or quarter create a sales invoice posting them all at cost price (plus VAT where applicable) to a new nominal “goods for own use” under the purchases section - yes, you can post a sales invoice to a purchases code as long as you edit the settings for that nominal account in the chart of accounts and tick the “Allow this code to be used in sales invoices” box.

On your profit and loss account you then see

  • General purchases £xxx,xxx (debit, in red)
  • Goods for own use £yyy (credit, in green)
  • Total cost of sales x minus y

@FaradayKeynes is it really an option to “do nothing” (assuming you’re not VAT registered)? Wouldn’t that over-state your expenses for the year and end up showing too little profit?

Edit: I forgot to mention - in order to close the loop I mark the monthly “invoice” as paid into the appropriate partner’s drawings account.

Option 1, doing nothing works for wastage or theft of stock BUT for drawings humm NO. It has to be recorded either journal or as suggested by Ian by invoice. Any private use of items would require vat adjustment if vat registered

Thank you very much for your answers.