Year end Closing Stock part manufactured for cost of sales

Accounting
1

Hi,

I’ve had a search for this but didn’t find a definitive answer.

I’m registered as a sole trader, I am doing my year end accounts and need to work out closing stock value for cost of sales.

I sell supplements and have purchased some raw ingredients and labels for products last financial year that have not yet been manufactured and finished.

My question is when working out closing stock should I include the part costs for all the unfinished products and raw ingredients that will be finished in this 16/17 financial year?

Many thanks,
Will

2

Think back to when you bought the things to start with - if you treated them as cost of sales (general purchases or any other nominal code in the 5000 range) then you should count them as closing stock at year end. If you treated them as overheads then you shouldn’t include them in closing stock but you may need to journal them separately as “prepayments”.

1 Like
3

Hi Will,

I would think they are but Ian is right and if you have included as overheads originally you can’t class them as work in progress.

Also remember to include them at the lower of cost or net realisable value (what you can sell it for).

Kind regards,
Chris

4

Thank you for your replies.

I originally classed the costs for the raw ingredient powders as “materials imported” and I think the labels as printing but I’ll have to check.

So when calculating closing stock I add up everything I’ve included over the year in the nominal code 5000 range (because all of these would already be included in the cost of sales formula?) that I did not sell in the 15/16 financial year, using the lower of what I paid for them and what they can be sold for?

Do I still need to create a Journal to move to closing stock?

5

That is pretty much correct. The journal would be as follows:

Dr Balance sheet stock X
Cr P&L stock X

This would then become your opening stock figure next year.

Kind regards,
Chris