What is the simplest way to account for low value stock?

What is the simplest way to account for low...

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I help to run a small gardening and plant centre company, and want to find the simplest way to manage accounting for stock in the retail side of the business.

The plant centre sells a range of plants, trees, gifts and other items that range (in retail price) from £0.20 to over £100 per unit. Currently, every stock purchase is recorded as a current asset on the balance sheet, and transferred to cost of sales at the end of the month after a (laborious) stock count. We currently have no EPoS system, so every sale is recorded by hand, and until we get an EPoS system (hopefully next spring), I want to make things simple.

Would it be acceptable to account for different items differently depending on their value? It would make my life so much easier if, for example, I could only keep items over (say) a £10 retail threshold as stock, and put everything else straight into cost of sales when purchased? That would massively change the amount of manual counting (and recording) that I need to do.

Any thoughts greatly appreciated.

Thanks, Simon.

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By Richard Willis
06th Oct 2011 10:32

Do you have

a consistent markup policy?

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By Cruncher42
06th Oct 2011 12:15

Materiality concept

My thoughts are:

Simplify the stock take by accounting boxes of your small items rather than each individual one.  It is a bit difficult without knowing the specifics of your stock, but for example if you are selling cable ties at 20p each which come in boxes of 500 costing £100. Account for the £100 boxes in the stock take rather than the 20p individual items. 

Obviously this will be less accurate but there is a concept in accounting called materiality.  Basically this means if the inaccuracy is not creating a false impression of the business because it is so small relative to the size of the business, then you can ignore the inaccuracy.  It is quite commonly applied to stock taking - typically of stationery items at a year end. 

You would need to be the judge of what is a material inaccuracy and what is not. 

 

Damion Viney

Accountants South London

 

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