Closing Stock

Question asked by Asif Patel 10 years ago

Hello,

I am in the process of finalising my year end, but I have a question on closing stock.

I have been making purchases throughout the year, which have been hitting my P&L. At the end of the year, I have a value for my closing stock (units * cost of stock).

I have to transfer my closing stock from my P&L into the Balance sheet.

My question is how do I do this, is this through a regular journal (i.e. DR Stock in the Balance and CR Purchases at the year end with my stock value)?

Please can someone advise if they have done this before?

Thanks

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2 Replies

Hi Asif - it is traditional to create opening and closing stock codes in Cost of sales, then, as described above Dr the balance sheet stock and credit closing stock in the P&L at the year end.

Then, as described above, when you come to do next year's or period's accounts, credit balance sheet stock and dr opening stock, in the P&L, with the same figure as above and dr stock, credit closing stock, wit the new period's closing stock.

Best answer
10 years ago

Hi Asif,

You can re-value your stock as often as you like, however the best way to do this is indeed through a journal - an example would be this (although you might want to confirm this with your accountant):

In August stock was worth £2,000; but was £5,000 at the end of September

Dr Inventory £2,000 Cr Cost of Sales £2,000

We suggest you date this on the 31st August.

On the 30th September create a journal to reverse out the August inventory balance:

Cr Inventory £2,000 Dr Cost of Sales £2,000

Finally journal the September valuation:

Dr Inventory £5,000 Cr Cost of Sales £5,000

Both the latter would be dated 30th September.

10 years ago

Hi Asif - it is traditional to create opening and closing stock codes in Cost of sales, then, as described above Dr the balance sheet stock and credit closing stock in the P&L at the year end.

Then, as described above, when you come to do next year's or period's accounts, credit balance sheet stock and dr opening stock, in the P&L, with the same figure as above and dr stock, credit closing stock, wit the new period's closing stock.

Best answer
10 years ago

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