Stock valuation - bit of an unusal one or I'm being a muppet

Firstly apologies if this is covered elsewhere I did have a good look but could not find anything - first time posting.

I have just taken on a new Ltd Company client. The company is 3 years old - the accounts I am preparing are the third set for the year ended 31 December 2010, I have just taken them on from another firm.

The company is made up of 1 director who has invested £150k as a directors loan. The company buys equity shares in FTSE100 companies, holds them for anywhere between 3 months and 18 months and then sells them - pretty simple.

The previous accountants recognised revenue on the completion of a company share or investment transaction for example, they buy £1,000 of shares in company X in 2009, these are then sold in 2010 for £1,200, the £200 revenue is recognised in the YE 31 Dec 2010 accounts.

That's the background so my question is; if the company holds £100,000 of shares (stock) at the year end in 2009 and nothing changes in the company at all apart from the shares going up and down in value, at the end of 2010 the shares are worth £90,000 - obviously the stock figure will decrease by £10,000 but what is the other side of the double entry?

Does it effect the profit and loss this year, do I need to make an adjustment to last years retained P+L, do I create a stock revaluation account or something like you would when a company holds different currencies??

Sorry if this is quite a simple question but I've been staring at excel spreadsheets and bag loads of share info all day and my head is about to explode!!

Thank you for any help or advice you can give - really grateful!

 

Catherine

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ireallyshouldknowthisbut |

FRS 26

Coeus |

Catherine

pembo |
pembo's picture

Thank you guys, you've been a great help - 1 more little questio

catherinebeck |