Stock should be valued at the lower of cost and net
realisable value.
Net Realisable Value
This is the projected selling price less any additional
costs required before the goods can be made
available for sale.
If the net realisable value is less than the cost, then the
stock of finished goods should be valued
at Net Realisable Value (NRV) but not at original purchase
cost.
Valuation for goods on a sale or return basis
The goods remain the asset of the supplier until it is sold
to a third party by the buyer.
This means any goods held on this basis not sold out as on
the Balance Sheet date, will be
included into the supplier’s stock valuation.
Valuation for goods belonging to the customers but on the
supplier’s premise
Goods that are sold to customers and that the sales invoices
are issued but not delivered or taken up
by the customers should not be included into the supplier’s
stock valuation as at the
Balance Sheet date.
Stock Losses
Purpose:
To make a claim against an insurance company for stock
losses due to stock destroyed by fire or theft.
The following steps are advisable in order to have a
reasonable accuracy in calculating the value of the losses.
A)
WHEN NO STOCK RECORD IS MAINTAINED
Step 1
To calculate the cost of stock available
for sale
Opening Stock + Purchases
= Cost of stock available for
sale
Step 2
To calculate cost of goods sold
Revenue
(Sale) - Gross Profit = Cost of Goods Sold
Step 3
To estimate the cost of closing stock
Value
of stock available for sale - Cost of Goods Sold
= Cost of Closing Stock
Step
4
To
calculate the Cost of Stock Loss
Estimated Cost of Closing Stock - Cost of
Actual Stock At Hand
= Cost of Stock Loss
A)
WHEN STOCK RECORD IS MAINTAINED
Cost of Closing Stock as per stock record - Cost of Actual Stock
= Cost of Stock Loss
IMPORTANT REMINDER
THIS IS TO PROVIDE STUDENTS A COURTESY REMINDER THAT THIS BLOG IS
CATERED
TO HELP ACCOUNTANCY STUDENTS AT BASIC LEVEL TO GAIN A QUICK SUMMARY OF
MAJORLY ALL THE BASIC COMPONENTS OF THE BOOK-KEEPING AND ACCOUNTING
STUDIES.
IT IS NOT MEANT TO PROVIDE A COMPLETE CONTENT OF THE SUBJECT MATTER.
THEREFORE, STUDENTS ARE ADVISED TO TAKE THIS INFORMATION RESOURCE AS A
SUPPLEMENTARY READING ONLY.
THIS READING MATERIAL IS ONLY A SUMMARY OF WHAT IS ESSENTIAL IN
GETTING A GOOD
UNDERSTANDING BUT NOT AN EXHAUSTIVE ONE OF THE RELATED TOPIC.
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