Hi, I'd appreciate some thoughts on how we account for our stock.
our business sell goods that are tied with years and so goods become obsolete when the year finishes. The goods are normally purchased before the end of year, and some customers also pre-order them, and the goods are delivered near the year end for next year's use.
The next year's goods have always been treated as they were never sold, at the full purchases at year end, even though some of them are in effect sold, but haven't left our premises. And income is treated as advance income for next year's accounts.
A colleague questioned it, which made me think should the stock be actually adjusted to relfect the sales of next year's goods? As the cost of sales used next year's costs, would not it not actually relfect the true cost of sales?
Our accounts are audited, so I would think the auditor would point it out if it's not done according to the accounting rules.