Hi
I sell eco friendly natural soaps etc. which have a use by/best before date so once that date has passed I can no longer sell these and have to write them off. I do the journal entries for opening and closing stock, but that then assumes I have sold the stock - or am I missing the point?
It basically all comes out in the wash when you do your year end stock take. When you bought the soaps or their ingredients wholesale you would have recorded what you paid the supplier as “general purchases” (a cost of sales code). When you do your year end stocktake you journal the value (this is the important word - for stocktake purposes this is the lesser of what it cost you to buy or what you think you can sell it for in its current condition) of your year end stock as a credit to closing stock, and the value of your year start stock as a debit to opening stock, which leaves your final cost of sales for the year as the cost to you of all the stock that your business “consumed” that year.
Most of that consumed stock would be sales, for which you’ve got the retail value in your turnover under “general sales”, but stock that you’ve written off simply shows in cost of sales at its full purchase cost (as its “value” at the end of the year is zero) with no sale to recoup any of that outlay.