I run a small mail-order business and have invested in a large number of first-class stamps (£6,000) as I am expecting the postal cost to rise after the strikes are settled.
I am finishing my end-of-year accounts and believe that I should include these stamps as “Closing Stock” but I need to move it from “Postage and Carriage” to “Closing Stock” if I create a Journal it just adds £6,000 to both “Postage and Carriage” to “Closing Stock” how can I move it from one to the other.
I have now just added it to the total in the "Closing Stock” Journal is this correct?
Postage & carriage and closing stock are both P&L codes, what you need to do is move from a P&L code to a balance sheet one.
On the balance sheet side you can either use the existing “Stock” code or create a new dedicated code like “prepaid postage” in the same assets & liabilities section if you want to keep the stamps separate from your normal year end stock in trade.
Then you’d journal credit postage & carriage and debit prepaid postage (or stock) at the year end to get the unused stamps off your P&L and onto the balance sheet as an asset - only postage you’ve actually used to ship this year’s orders will remain under P&C. As you use the stamps up in subsequent years you’d then journal back the other way (credit prepaid postage and debit P&C) to put the value back in cost of sales for the relevant year.
Thank you, I think just keep the existing “Stock” code, I have tried adding a new dedicated code like “prepaid postage” but it seems to add the money in two places it could be my journals are incorrect, or “Postage and Carriage” is in “Overheads” whereas stock is in “Purchases”
In my QuickFile account I have three different nominal codes relating to postage, all on the profit & loss report:
- “Postage and Carriage” is under overheads and the description suggests that is for expenses you incur when shipping things to your customers. This would normally have a zero or debit (red) balance on P&L
- “Carriage” is under purchases (i.e. cost of sales) and is for expenses you incur when getting things shipped to you from your suppliers. This would also normally be zero or debit (red) on P&L
- “Distribution and Carriage” is a sales code for the income you receive when you charge your customers for shipping on top of the actual cost of their goods. This would normally be zero or credit (green) on P&L
Since postage & carriage is normally debit, if you make a journal on the last day of the accounting period which does credit postage & carriage and debit stock (1001) for the value of the unused stamps, then that will reduce the postage & carriage total on your P&L for the year, and add the same amount to stock on your balance sheet.
The following year when you actually use the stamps you’d journal credit stock and debit postage & carriage for the value of the stamps you used, which would reduce the balance sheet stock figure and increase the P&L postage & carriage.
The stock codes are complicated. Speaking from my own experience as a retailer:
“Stock” itself is a balance sheet code 1001 and represents the unsold stock that you have in hand at any given time, but it is usually only accurate at the year end immediately after you’ve done a stock take.
“Opening stock” and “closing stock” are P&L codes in the purchases section, but they’re only normally used as adjustments following a stock take.
Day to day I would record my turnover as “general sales” and my purchases of stock as “general purchases”. At the end of year I take the value currently on the “stock” code (which was my stock in hand at the end of the previous year, if any) and journal credit stock and debit opening stock. Then I do my annual stock take and calculate the value of stock held at the end of this year, and journal that value credit closing stock and debit stock.
The overall effect of all this is that when I look at the P&L report for the year I see my cost of sales as the value of stock I held at the start of the year (opening stock), plus the value of stock I bought during the year (general purchases), minus the stock I still hold at year end (closing stock). So the net cost of sales works out as the purchase value of all the things I actually sold that year, regardless of whether I bought them during the year or still had them in stock from the year before.
My suggestion of creating a “prepaid postage” code was to make that a balance sheet code in the same section as “stock” (e.g. 1005) so that if you have to do similar adjustments for opening and closing stock then these are clearly separated on your balance sheet from the extra stamps.
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Thank you that works
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