Stock vs General Purchase


I have been reading through some of the past questions and answers however haven’t fully grasped the application to the hairdressing business.

The business owner buys hair dyes, nail polish etc that is used to provide a service ie doing someone’s hair or nails. It’s sold within the service of cutting hair etc as the charge of cutting and colouring the hair is included in the price charged to the client.

Is this purchase of nail varnish or hair dye a stock or a general purchase?


Technically it’s both, although for simplicity it’s best to log these items as “general purchases” (or a nominal code of your choice under the purchases header). When you log to stock you’re recording these items to the balance sheet so they will show as an asset on your accounts… as if you’re holding goods in a warehouse. This is fine but it means every time you dispose of such items you need to journal from stock back to general purchases so you’re always correctly reporting your stock values.

This is overkill for most small businesses as you rarely need a real time value of your inventory. It’s much simpler if you instead just take a stock value when you prepare your accounts and simply insert one journal to show all held stock so you can prepare an accurate balance sheet at that point in time.

Hope that makes sense!

Thanks Glen. Yes. I had originally entered as stock but was not content when viewing reports. I understand what you are saying and it answers my question with a simplified solution.


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