Accounting for stolen, destroyed stock

Accounting for stolen, destroyed stock

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Hello!

One of our clients is a company which sell grocery goods in a store. We are in the process of preparation of their year-end accounts. After the inventory of company’s stock has been completed, management came up with the figure of stolen goods and goods that were disposed after expiration date. However we struggle to put that figure in company’s accounts. Thus we need an advice as to how to account for stolen goods in terms of double entry and how to show that figure in profit and loss account.

Thank you.

Replies (13)

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By mrme89
07th Jun 2014 13:27

For stolen stock I would record as:-
Dr purchase
Cr stock

For expired goods I would set up an expense account for wastage:-
Cr stock
Dr wastage

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Replying to K81:
By johngroganjga
07th Jun 2014 18:03

Not right

mrme89 wrote:
For stolen stock I would record as:-
Dr purchase
Cr stock

For expired goods I would set up an expense account for wastage:-
Cr stock
Dr wastage

These entries are not right.

Thanks (1)
Replying to tom123:
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By mackthefork
07th Jun 2014 19:13

I suppose you could

CR Purchases

DR Theft and wastage

But I would call that a cost of sale so I do not see what it achieves.

MtF

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Replying to Wilson Philips:
RLI
By lionofludesch
09th Jun 2014 10:28

Theft ?

mackthefork wrote:

But I would call that a cost of sale so I do not see what it achieves.

MtF

Having your stock stolen is not a cost of sale.  Nor, incidentally, is it a supply for VAT purposes.

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By the_Poacher
07th Jun 2014 13:39

?
Is the gross profit rate so bad that you need to do something to improve it? Why not just record the stock as per the stocktaking?

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By johngroganjga
07th Jun 2014 15:03

Stock stolen or destroyed by the balance sheet date is by definition already excluded from the closing stock figure. So you don't need to account for it as such, as it is already accounted for.

But if you want to show, say, the cost of stock stolen as a separate line in the profit and loss account, just Dr Stolen stock and Cr COGS. As the previous response points out, that just increases the reported gross profit but has no impact on the bottom line.

Thanks (2)
Replying to User deleted:
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By The Limey
08th Jun 2014 22:04

Seems basic.

johngroganjga wrote:
Stock stolen or destroyed by the balance sheet date is by definition already excluded from the closing stock figure. So you don't need to account for it as such, as it is already accounted for.

But if you want to show, say, the cost of stock stolen as a separate line in the profit and loss account, just Dr Stolen stock and Cr COGS. As the previous response points out, that just increases the reported gross profit but has no impact on the bottom line.

Fully agree with what you have put. Can I also express concern that the original poster had to ask this question. It seems to be the sort of thing a first year trainee might ask. Not what I would expect of somebody who thinks they have the skills to run their own practice.

Thanks (5)
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By Rosalea
07th Jun 2014 19:09

As has been stated previously, the obsolete and stolen stock is accounted for by not being in the closing stock valuation.  Where the numbers and values are useful is as a management development tool.  For example, your client buys 10 cans of beans, sells 7 but has no cans of beans in stock at period end.  They should be asking themselves What happened to the 3 missing cans?  How can stock be monitored better in order to minimise pilfering?  Similarly when stock is out of date they should be asking - Are we buying too much stock?  When should we review the remaining shelf life of stock in order to minimise this type of loss?  If I were in your position I would view this as an opportunity to extend services and increase revenues.

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RLI
By lionofludesch
09th Jun 2014 10:27

Estimate

Stolen stock is, of necessity, an estimate.  For out of date stock, this needs to be recorded in a diary, whether the stock is sold at a lower price or disposed of as unsaleable.  Failure to keep these records means problems ahead ......

Agree with johngrogan (again) re the postings.

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By johngroganjga
09th Jun 2014 10:33

Agree that stolen stock is not a cost of sale because, to state the obvious, it has not been sold.

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By FCExtraordinaire
09th Jun 2014 11:25

If still included in the figure of a stock check,   eg  a printout out,  but the stock is not physically present,   the accounting adjustments still need to be carried out. 

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By johngroganjga
09th Jun 2014 11:35

Yes if there is a perpetual stock system that is out of date it needs to be updated to deal with scrappings and thefts, but those are entries in the stock records only, not entries in the accounting records.

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By Jane Louise Walker
20th Feb 2015 09:46

wastage

Hi, the client keeps wastage figures but if we use the stock that the stocktaker has counted surely we dont need the wastage figure?

 

 

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