Stock accounting - Adjusting Stock Asset code 1001

Accounting
1

Hi,
I am new to the forum so hope I am posting this in the right place.
I am getting confused with how to account for stock in Quickfile and want to do it correctly.
When I have been purchasing stock I have been coding it to stock (asset) which has been automatically posting the values into n/c 1001. When I sell from stock I just use the General sales option. Obviously my stock holding is not reducing by doing it this way. I have seen the opening and closing stock codes 5200 and 5201. Am I right in thinking that I need to do a journal to take it out of 1001 at the end of the year and into cost of sale. If so how do I show closing and opening stock.
I would really appreciate clarification on this - sorry if I am being a dunce.
Cheers, Steve

2

you need to record your stock buying as purchases not stock asset. At year end, you have to do actual physical stock count and do one journal as follows

Dr Stock (asset)
Cr Closing stock (P&L)

3

Why not just account for stock at the year-end, or once every quarter? If you’re journalling in and out of the balance sheet for every item sold it’s going to be a whole lot of work. Instead of logging stock purchase to 1001, you could use general purchases (5000) instead (i.e. keep it all on the P&L).

At the year end do a stock take and move any surplus to the balance sheet.

4

Ok, That makes much more sense (and less work!). I opened this year with about ÂŁ4k in stock which is sat in 1001. So if I am understanding correctly I just sell on P&L as General Sales and then following year end stock take I journal the correct remaining stock value from 1001 to closing stock. Is opening stock just for 1st years trading? Thanks

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5

That sounds about right to me, you can then just do a stock valuation at your year-end to account for any stock held on premises, the rest just keep it on the P&L.

6

Thanks as usual Glenn. As usual I have been guilty of trying to over-complicate things. Have a good weekend.

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7

Glad to help, have a great weekend!

8

I just want to double check how to do this correct.

I have added all purchases as general expenses. At en of the year I’m left with say 100 units of £10 each. So I do a journal:

Db 5000 general purchases ÂŁ1000
Cr 1001 stock ÂŁ1000

Or should it be Cr 5201 closing stock (or ideally first to 1001 then to 5201)?
Should I then on the first day of the new year move from closing stock to opening stock?

9

The year end journal doesn’t touch general purchases. If you have £1000 worth of stock left at the end of the year then you journal

  • Debit “stock” ÂŁ1000
  • Credit “closing stock” ÂŁ1000

This means your final P&L for the year will look like, e.g.

  • General purchases: debit ÂŁ100,000
  • Closing stock: credit ÂŁ1,000
  • Total cost of sales: debit ÂŁ99,000

and you’ll have £1000 of stock in hand on your balance sheet. If you already had a “stock” figure from the previous year end (or looking ahead, this is what you will need to do next year) then you would journal that the other way, credit stock/debit opening stock. This would give you, e.g.

  • Opening stock +2000 (same value as the previous year’s closing stock)
  • General purchases +100,000
  • Closing stock -1000
  • Total cost of sales ÂŁ101,000
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10

However that stock has already been registered as “general purchase”, nor “stock”. So I think I need to move it from general expense to to closing stock ?
I think this is what Glenn suggests above.
Thanks!

11

No, you don’t. Both the “General Purchases” and “Closing Stock” nominal codes fall under the “cost of sales” heading on the profit and loss report, so by journalling cr closing stock/dr stock your final P&L will look right. General Purchases gives the total amount of stuff you’ve bought during the year, closing stock gives the value of stock that you bought but didn’t sell, and since General Purchases is a debit and Closing Stock is a credit the “total cost of sales” line will be general purchases minus closing stock.

The aim is to get the P&L to show the calculation that your total cost of sales for the year is the value of whatever you started with at the year start (zero in your first year), plus whatever you bought in, minus whatever you had left over at the year end.

  • 5000 General Purchases ÂŁ10,000 (red)
  • 5201 Closing Stock ÂŁ1,000 (green)
  • Total cost of sales ÂŁ9,000 (red)

The following year:

  • 5200 Opening stock ÂŁ1,000 (red)
  • 5000 General purchases ÂŁ8,500 (red)
  • 5201 Closing stock ÂŁ750 (green)
  • Total cost of sales ÂŁ8,750
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12

Thanks, it makes sense now.
And for the first day of the next year it would be: Db opening stock and Cr stock?

13

Yes, though it doesn’t have to be the first day. I’d put both the opening and closing adjustments for a given year through at the end of that year and leave the previous year’s “stock” on the balance sheet during the year, to make interim P&L reports during the year a bit more meaningful (just showing that year’s purchases and sales). Obviously it won’t be 100% accurate until you do another stocktake and add the journals but if you expect to have a similar amount of stock in hand from one year to the next it shouldn’t be far off.

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