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How to account for stock held by manufacturer?

Stock is produced and held by manufacturer but owned by us

Hoping someone can help how I account for the following situation:

A manufacturing company (ABC Limited) make drinks for us, they buy all the raw materials and give us a fully loaded price after production.

ABC are happy to store all our drinks until required (after a certain volume we are charged storeage costs). We are invoiced on 30 day terms once the drinks have left their warehouse. Should I be accounting for these drinks as GRNI. They could be there for up to 6 months before being used and therefore invoiced?

Thanks in advance for any help!

 

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By DJKL
11th Sep 2017 15:08

They do not invoice you until they leave their warehouse,so when does legal title in the goods pass to you?

Appears to have no profit impact anyway, if becomes your legal property upon production it merely becomes:

Dr Stock
Cr Creditors

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By tom123
11th Sep 2017 15:30

We have various call off arrangements with our suppliers.

We just include the stock when we have it.

At the end of the agreement I could potentially be on the hook for purchasing the uncalled stock, but this doesn't tend to happen often.

Thanks (1)
11th Sep 2017 22:22

What would happen if your company went bust?

Would the drinks belong to ABC Limited - or the liquidator?

That's the question you should ask yourself.

But, as DJKL says, the impact on profit is zero.

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