Using stock/purchases as rental items

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Hi all,

I work in an electrical goods company where we are only selling the goods. We are now looking at using some of our purchased stock to hire out as rentals.

How would I post a journal from stock, at cost price, to fixed assets at RRP? 

For example, 

Cr Stock           £100 (Cost)

Cr ???               £200 (diff)

Dr Fixed assets £300 (RRP)

 

Thanks in advance.

Replies (12)

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By David Ex
31st Aug 2023 12:11

PixK wrote:

How would I post a journal from stock, at cost price, to fixed assets at RRP? 

Why would also be a good question to ask.

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Replying to David Ex:
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By PixK
31st Aug 2023 12:24

Please elaborate?
By questioning this part, I'm assuming you are saying that the Fixed Asset value should be cost price and not at RRP?
If so, can you explain? My way of thinking is if we were to buy the same product from an external supplier for the same purpose, we would record those in the accounts at the RRP.
Is this incorrect?
Thanks.

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Replying to PixK:
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By Bobbo
31st Aug 2023 12:49

If you bought the same product from an external supplier for the same purpose, you would record those in the accounts for how much they cost you. That might be the "RRP", it might not be.

(Ignoring VAT which may be included in an RRP for this purpose)

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Replying to PixK:
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By Tax is always taxing
31st Aug 2023 12:56

But you did purchase it from an external supplier and the cost was the cost.

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By Tax Dragon
31st Aug 2023 12:22

Are you allowing tax law (s157 CTA 2009) to govern your accounting treatment? Accounting follows accounting rules and tax follows tax rules.

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Replying to Tax Dragon:
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By PixK
31st Aug 2023 12:26

I've no idea, that's why I'm asking.
My accountant is taking forever to reply.

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Replying to PixK:
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By Tax Dragon
31st Aug 2023 12:31

When did you ask him/her?

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Replying to Tax Dragon:
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By PixK
31st Aug 2023 12:33

Monday

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Replying to PixK:
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By Leywood
31st Aug 2023 13:10

Good grief. Have some patience.

It’s not exactly urgent is it!

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Replying to PixK:
RLI
By lionofludesch
31st Aug 2023 15:20

PixK wrote:

Monday

Bank holiday Monday ? Or are you in Scotland ?

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By accountaholic
31st Aug 2023 13:07

Sounds like alchemy to me I'm afraid. You'd be creating £200 profit from thin air. You had a £100 asset the day before, and would have a £100 asset the day after. If the asset hasn't changed in any way I don't think you can book an increase in value.

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Routemaster image
By tom123
31st Aug 2023 13:44

Is fixed assets the right place?
I would have another category of stock for the hire fleet.
How long will the kit last? 2 years?

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