Bookkeeping - Closing Stock

Hi,

Can anyone help?  I am doing my husbands bookkeeping for the first time using the figures from last year's accounts and am totally confused about closing stock!  If I take my opening stock and add my purchases and then minus my sales I end up with a minus figure - what am I doing wrong?!  He is an electrician so his purchases are a lot less than his sales.

Any help would be appreciated.....

Ali.

Comments
petersaxton's picture

Need to consider the situation in great detail

petersaxton | | Permalink

Are you using your selling price for sales instead of purchase price?

To really understand it you need to use quantities for each item.

What information do you have for opening stock?

Are you recording closing stock using a stock count?

What are you trying to do?

scalloway's picture

Cost of sales

scalloway | | Permalink

You should lay it out like this

 

Sales                                £XX,XXX

Opening stock       £X,XXX

Add purchases      £X,XXX

Less Closing stock £X,XXX

Cost of sales                   £XX,XXX

Sales less cost of sales   £XX,XXX (Gross Profit)

Cost of sales is your goods sold at cost price.

Missing stock

sooty123 | | Permalink

When you add the Opening Stock to the Purchases for the year you also need to deduct the Closing Stock and this will give you a figure called Cost of Sales. This figure is deducted from the Sales to give you the Gross Profit or Gross Loss. The overheads are then deducted and you will arrive at a Net Profit or Loss.

If your figures show that you have a Gross Loss, then recheck your figures again as either the Opening Stock (i.e. the stock at the beginning of the year) is too high or your Purchases are too High or that your Closing Stock (i.e. the stock at the year end) or your Sales are too low, or maybe a combination of these.

 

I hope this helps.

 

Sooty

 

Bookkeeping - Closing Stock

alisontully | | Permalink

Hi and thanks for the reply,

I have a purchases account listing all the purchases made in the year (materials for the jobs etc) which opens with the closing stock figure from the last tax year and I have a sales account lising all invoice totals for the year and that is it!  SO I have a balance b/d for the purchases of £6k plus and a sales figure of £22k plus.

Everything I have looked at suggests I should deduct the sales from the purchases to get the closing stock but that would give me a minus figure.

I don't have a seperate stock account as I thought purchases and stock were the same thing?

Ali.

jmleeco's picture

Problem with book keeping

jmleeco | | Permalink

Hi

Your puchases should be just materials purchased to be used on jobs, not any expenses such as phone, compuer costs, rates etc, and adding the stock figure from the closing balance on last accounts is fine.  At the end of the financial year deduct the stock value ( value it at buying prices) and that then gives you the total purchases for the year.  The sales, that is the total invoiced to customers, less the total purchaes gives you the gross prfit for the year, then deduct all the expennses such as phone, motor etc and that gives you the total profit for the year, roughly speaking.  Hope that helps.

Jean

petersaxton's picture

What are you trying to do?

petersaxton | | Permalink

I think you are trying to do the wrong thing. You don't say what you are trying to arrive at.

You need to do a stock count if you are wanting to arrive at a gross profit. You also would need to only look at sales of stock. Invoices for services shouldn't be included in the gross profit figure.

If you are trying to calculate closing stock then you need to use the sales of stock at purchase price.

"Everything I have looked at suggests I should deduct the sales from the purchases to get the closing stock but that would give me a minus figure." What have you looked at? That would only make sense if you didn't make a profit or loss (assuming when you say "purchases" you mean "opening stock plus purchases").

scalloway's picture

Cost of Sales

scalloway | | Permalink

"Everything I have looked at suggests I should deduct the sales from the purchases to get the closing stock but that would give me a minus figure."

I have thought about this for a while and the only conclusion I can come to that makes sense from a bookkeeping perspective is that you mean:

I should deduct the Cost of Sales from the purchases to get the closing stock.

The Cost of Sales is goods sold at cost price. Deducting this from your sales of goods at sale price gives you the Gross Profit on goods sold. Labour sales are only added after this.

This article deals with stock losses but gives some formulae for calculating stock values.

http://www.bized.co.uk/learn/accounting/financial/nonprofit/losses.htm

Bookkeeping - Closing Stock

alisontully | | Permalink

Thank you all so much for the feedback.  I know it's very difficult to help when you can't see the figures or know exactly what it is I am trying to do. 

As there was no physical stock left at the end of the period I will assume a closing stock of zero and go from there. 

Thanks again,

Ali.

FINDING CLOSING STOCK

koromat2012 | | Permalink

 

Here is my advice:

 

Sales..................................................................50xx

LESS:

Opening Stocks.....10xx

Add

Purchases..............15xxx

                                                                           (25XX)

CLOSING STOCKS + Cost of Goods Sold               25xx

 

 

If you assume Closing stock is 0 then, Cost of goods sold is 25xx. Alternatively if you know your margin you can deduce the cost of goods sold.

You can also visit all your invoices to determine the purchase cost of the goods sold.

I hope this will help.

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