Stock value on balance sheet

[retromunky]

Evening All,

I'm using Kashflow for my bookkeeping.

Have got it configured correctly I think, apart from one area. I have my "Stock Purchased" (nominal 5000) set as a cost of sale - meaning that on the P&L I see the total revenue from my sales, the total cost of my stock purchased during the period and the resulting gross profit (revenue minus cost of stock).

I don't, however, have any figure recorded on my balance sheet for the value of the stock being held. Surely the stock held is a current asset?

Is this correct, or am I missing something here?


Thanks,

Marc

 

[LicensedToTrade]

Evening All,

I'm using Kashflow for my bookkeeping.

Have got it configured correctly I think, apart from one area. I have my "Stock Purchased" (nominal 5000) set as a cost of sale - meaning that on the P&L I see the total revenue from my sales, the total cost of my stock purchased during the period and the resulting gross profit (revenue minus cost of stock).

I don't, however, have any figure recorded on my balance sheet for the value of the stock being held. Surely the stock held is a current asset?

Is this correct, or am I missing something here?


Thanks,

Marc

I'm not sure how your balance sheet is laid out (I've never used Kashflow) but stock is typically described as capital employed.

 

[Scalloway]

You would need to have a stock control module in your accounting software and use it to record stock as it comes in and goes out. The only other way is to do a physical stock-take and journal the stock value.

 

[retromunky]

Running a "balance sheet" report in Kashflow just gives me -

Fixed Assets

Total Fixed Assets: £x
Current Assets

1203 (bank) x
Total Current Assets: £x
Current Liabilities

1205 (overdrawn account) x
Total Current Liabilities: £x
Current Assets less Current Liabilities: £-x
Fixed Assets + Current Assets less Current Liabilities: £-x
Capital and Reserves

P&L Account -x
Total Capital and Reserves: £-x

There's no mention of the value of the stock.

Thanks,

Edit: Kashflow does have a stock control module, which I am using. I can't remember whether when configuring things I changed anything though in terms of how the "stock purchased" code was set up - should this be a cost of sales code, or balance sheet?

 

[johndon68]

I've never used it but, if Kashflow is anything like Sage in this respect, the value of stock will not be shown automatically on the balance sheet as the stock module is not linked directly to the accounting ledgers.

If that is the case then you'd need to post journals (or whatever the equivalent is in Kashflow) to show the opening and closing stock figures each month...

John

 

[retromunky]

Ah, that seems to make some sense then - thanks!

So, if I create a 'current asset/liability' nominal for "stock at hand" and then make a journal entry for the value of stock held currently, then a further entry for stock held at the end of the month, would this be correct?

Would I record stock value at my cost price, or my realisable value?

Thanks again,

 

[Scalloway]

Stock is valued at either cost or realisable value, whichever is lower.

 

[LicensedToTrade]

Ah, that seems to make some sense then - thanks!

So, if I create a 'current asset/liability' nominal for "stock at hand" and then make a journal entry for the value of stock held currently, then a further entry for stock held at the end of the month, would this be correct?

Would I record stock value at my cost price, or my realisable value?

Thanks again,

Record it at cost price. If you record it at a value that you think it can be sold on for you will corrupt your COGS/COS calculations.

Realisable would only factor in if the value of your stock had dropped below that of your purchase price.

 

[Scalloway]

I should add that the opening stock value must be journalled back to purchases when the journal for the next month's stock value is transferred.

 

[retromunky]

Sorry Scalloway, that last post has gone right over my head!

I've just created a journal entry for "stock holding", debiting the value of the stock holding to the new balance sheet nominal I just created for stock value - however what do I credit to make it balance? If I credit purchase of stock then the balance sheet looks ok but the entire cost of the stock disappears from the P&L, so I don't have a true figure of what I've spent on stock this month.

 

[internetspaceships]

Yes definitely record at cost.

If you need to apply any write downs later you would find it less confusing this way.

 

[retromunky]

Ok, if I tick the "exclude from P&L" box on the journal, my balance sheet and P&L look how I'd expect them to - is this the correct way of doing this?

 

[internetspaceships]

It depends.

Some people keep a separate stock system and stock value, completely independent during the working week from their accounts package.

They enter values into the accounts system as required at intervals to balance the books.

For example, you can run Sage with or without stock. It's your call which system you choose to use.

 

[retromunky]

From the comments above, it seems that the built in stock control system in Kashflow is effectively a separate system, in that it doesn't post any information into the financial records (although the opposite does happen - when I enter an invoice for a stock item, the stock is deducted from my stock holding - I suspect this is simply a quantity deduction though and that Kashflow does not calculate stock holding values itself).

What I'd like to do is be able to post a snapshot of stock holding value, perhaps once a week/month so that I can run a set of reports including a balance sheet and have the data as accurate as possible.

In this case, would posting a journal debiting a "stock holding" balance sheet nominal and crediting the "stock purchase" COS nominal be the correct way of doing things? Ticking the exclude from P&L box so that it doesn't skew my profit calculations for the period of the calculations?

What do I do if there has been no additional stock purchase, but stock value has fallen in the interim due to sales - would I then credit the stock holding nominal (to reduce the value on the balance sheet)? And if so, which account would I debit - and would I tick to show on the P&L or not?

Sorry for so many questions, just trying to get my head around it.


Thanks again for the help

 

[LicensedToTrade]

Ok, if I tick the "exclude from P&L" box on the journal, my balance sheet and P&L look how I'd expect them to - is this the correct way of doing this?

No, never assume your work is done just because it looks how you expect. Nine times out of ten it looks right because it is right, but it will be that 1 out of 10 times that goes on to cause you problems a few months down the line.

 

[internetspaceships]

Personally I go for the separate stock system and add in the stock values to accounts as required.

We run Sage and it's not geared towards our stock needs. We run over 4,700 individual lines of stock with multiple suppliers, stocking prices and conditions.

 

[retromunky]

No, never assume your work is done just because it looks how you expect. Nine times out of ten it looks right because it is right, but it will be that 1 out of 10 times that goes on to cause you problems a few months down the line.

I think the issue is that I'm crediting the "stock purchased" account, which is why if I allow it to be included in the P&L it skews everything. Which account should I be crediting when I debit the Stock Held balance sheet nominal?

Thanks,

 

[LicensedToTrade]

I think the issue is that I'm crediting the "stock purchased" account, which is why if I allow it to be included in the P&L it skews everything. Which account should I be crediting when I debit the Stock Held balance sheet nominal?

Thanks,

As I said before, I've never used Kashflow, but if you list all of your ledgers I (or more likely someone else) should be able to identify where the balance should occur.

 

[retromunky]

Thanks. List of ledgers below -

Code Name

9998 Other

Sales
Select All / De-select All

4400 Credit Charges (Late Payments)
4001 Sale of goods
4905 Shipping

Purchases
Select All / De-select All

6201 Advertising
7201 Amazon Subscription
7304 Amazon Transaction Charges
7102 Banking Charges - Misc
7303 Ebay Fees
7403 Entertainment
8204 Insurance
7100 Nochex Transaction Charges
7603 Professional Fees
7504 Stationery
5000 Stock Purchased
7502 Telephone
7400 Travel
7200 Website Running Costs

Bank Transactions
Select All / De-select All

7901 Bank Charge
7905 Credit Charges
7006 Employers NI
2201 Input VAT
7900 Interest Paid
7903 Interest Received
2200 Output VAT
7003 Staff Salaries
9999 Stock at hand
2202 VAT Control

As the ledgers probably identify, I'm an online retailer with 3 revenue streams - own website, Ebay and Amazon.

I'm thinking that the stock at hand code should probably not sit under bank transactions either? Not figured out how to move it yet though, nor where it should really go. It is defined as a balance sheet asset/liability though rather than anything else so I don't suppose it really matters.

 

[Scalloway]

You credit purchases. This gives you the cost of goods sold in the period. Next period this figure is added to purchases, then the closing stock is deducted to give you the cost of goods sold in that period.

 

[retromunky]

Ok, so I debit the balance sheet nominal "stock at hand" (9999) and credit the P&L nominal "stock purchased" (5000)?

So, at the present time lets say I have £100 in stock at cost - I would post a journal debiting 9999 £100, crediting 5000 £100? (Sorry, just want to make sure I'm correct). Or is this something done on a "period" basis?

At the beginning of the month, lets say I had £0 stock. At the end of the month, I have stock worth £100 - do I do as above?


Edit: Have just tried this (how I think I understand it) but it still doesn't seem to work as expected. Working on the below scenario, how would you expect this should be entered?

Start of month stock value - £0
Stock purchased during month - £150 (automatically entered into "stock purchased" when I enter the receipt, balanced with deduction from bank)
End of month stock value - £100

 

[retromunky]

I think I'v cracked it - setting up 2 COS nominals (1 for opening stock, 1 closing stock). For the start of the first month I DR opening stock, CR Stock at hand. Then enter purchases etc as normal. Then at the end of the month I DR stock at hand and CR closing stock - with the value of the stock at that time.

Start of next month I DR closing stock and CR stock at hand.

I can't link to it, but I found this in a post by AccountantsCircle over on the book-keeping forum. Seems logical, looks right (I know, doesn't mean it is) - what do you think?

 

[Scalloway]

At the very start of you business you will have no stock. All stock will go to purchases. At the end of your period value stock and do this entry:

Dr stock in balance sheet
Cr cost of goods sold

Then at the end of the next period

Dr cost of goods sold
Cr stock in balance sheet

This adds your opening stock at the new period to reflect the fact that some of it will have been sold in the new period

Then

Dr stock in balance sheet
Cr cost of goods sold

Which will move the stock at the end of the period to the balance sheet

Your closing stock at the end of the first period becomes the opening stock for the second period

 

[retromunky]

I think that's what I was trying to say above.

That's how I've entered it anyway, and everything seems to be correct.


Thanks again for all of your help everybody.