profit and loss report not suitable for income tax purposes

Problem reported by phil4v19 9 years ago

I have previously used quickbooks and I use their profit and loss report to extract figures for my tax return which are accurate. However on trialing clearbooks and viewing the P&L report I found the figures to be different (ie not correct) It displays the cost of all stock bought in the reporting period not just the cost of the stock that relates to the items that have actually been sold

Could an accountant please reply and clarify this.

thanks

Phil

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Hi Phil

You would usually make an adjusting journal entry on the last day of the financial year to 'remove' from cost of sales (P&L) the value of all stock you still have on hand, placing it on the balance sheet under inventory. Then, on the following day said position would be reversed.

The journal needed would look something like this:

file

If you didn't want everything getting lumped into the purchases code you could create one called closing stock then another called opening stock and then do two separate journals to represent first the movement out of closing stock > inventory then another from inventory > opening stock.

Hope that makes sense.

9 years ago

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