Should my stock purchases be shown in my profit and loss account ?
I run a retail shop, and the way I’ve always done it is to treat purchases of anything I intend to sell as “general purchases”, and the corresponding sales as “general sales”.
The “stock” code is only for year end adjustments. When you do a year end stock take you journal your YE stock in hand value from credit “closing stock” to debit “stock”, and also any value you already had on “stock” at the end of the previous year from credit “stock” to debit “opening stock”. These adjustments mean that your P&L shows the correct cost of sales for the year (what you started with plus what you bought minus what you have left) and your stock in hand shows on the balance sheet for your year end date.
Thanks for that so in complete laymans terms how do I go about adding what existing stock I had at the start of the year ?
Also I’m going to need to retag and update all the stock purchases I tagged as stock to general purchases now…
Is there a guide anyway as to what the category choices actually mean ?
What were you using for your book keeping before you started on QuickFile? And are you self-employed or a limited company? You’re probably going to need a journal dated on the last day of the previous year with the stock in hand amount as a debit to “stock” (which you can then move to opening stock as part of your next year end adjustment, as I described in my previous post), but I’m not sure where the matching credit should go. Possibly “capital introduced” if you’re a sole trader but you’d have to ask an accountant to be sure (I’m not one).
If you click through to the “stock” nominal code from either the balance sheet or the chart of accounts then there’s an option there to move a load of entries to a different code en masse.
I haven’t been using any other accounting software apart from a spreadsheet and started from fresh with quickfile…
So I followed this post about adding stock from the previous year.
Which I think I have done correctly…but doing it this was if I check my chart of accounts for my new year entered in quickfile my opening stock shows in the red column ?
My other question being, on quickfile I have tagged all physical item stock as “General Purchase” and all sold products as “General Sale” , so when I use the journal to bring stock in from the previous year its shown under purchases do I need to change this into general purchases…? Basically how do I get my previous years stock to link in with a general sale and reduce accordingly ? Or do I just manually do this at some point through the year when i stock take and reduce the stock amount ?
Also under my profit and loss report, , opening stock now shows under “Less cost of sales” in red is this correct?
That’s correct - opening stock should be in red (debit), closing stock will be in green (credit), making your cost of sales for the year equal to opening stock plus purchases minus closing stock (what you started with plus what you bought minus what you had left at the end).
Personally I wait until the end of the year to enter both the opening and closing stock journals together, otherwise when you look at the ongoing P&L report during the year you have a massive chunk of opening stock skewing the numbers. I just enter the purchases through the year and get an approximate profit to date from just this year’s sales minus this year’s purchases, then when I do the end of year stock take I enter the opening and closing values to adjust. Say I had £12,500 stock in hand at the start and £11,000 at the end - if I had entered the opening journal straight away then my P&L would be £12,500 down on reality through the whole year when really the overall stock adjustment is only £1,500 for the whole year.