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Using Stock

I am the bookkeeper for a guy who trades in repairing Mobility Scooters etc. He buys parts inc batteries, tyres and tubes etc and the purchases from the companies who supply him are coded to a nominal code 5012 ‘Parts, Tyres & Batteries Purchases’ in cost of sales. These items are held in stock (but not coded to stock when he buys them) until he needs them for a callout etc. When he then uses these parts for customers how do I account for them in the accounts. Does the stock accounts in cost of sales or balance sheet have to have entries posted? Should they be coded to stock in the first place when brought. if so what are the entries. Slightly confused here.

You don’t account for them at that time. Just value the stock in hand at the end of each accounting year and create a journal on the last day of the period: for the stock value at the end of this year it’s credit closing stock and debit stock, and for the stock value at the end of the previous year (if any) it’s credit stock and debit opening stock.

This makes your cost of sales for the year equal to the opening stock you started with plus the purchases you made during the year minus the closing stock you have left at the year end.

So presumably I’m doing the right thing at the moment by putting all parts & battery purchases in cost of sales?

Yes, anything you buy that will be re-sold or “used up” in the process of performing the services you’re selling should go somewhere under the 5xxx purchases section.

I agree with Ian. However, bear in mind that your Profit and Loss Report will not show the real Cost of Sales or Profit on a monthly basis, but will be correct at the end of the Financial Year when you make your Stocktaking adjustment.
It all depends on the values involved as to which decision you make.
I have friends who adjust the stock on a monthly basis because of the high volumes, both in items and monetery values (thousands of pounds). They use a FREE Stock Control System to monitor this … obviously this incurs processing time and administration.

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