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Why is the COS increased sometimes in the P and L?

Received accounts back and figures are higher than ours

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I'm an untrained bookeeper for a small company and I'm a little embarrassed that I don't understand this. Our accounts have been returned by the accountants but the opening stock, purchases and closing stock are all higher figures than in the TB. They net off the same though and end up giving the correct Gross Profit. How and why is this done? I have asked the accountants but they haven't explained it to me well.

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23rd Jun 2019 09:40

Whatever we said would be a guess.

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23rd Jun 2019 12:11

If it’s vital for you to understand the adjustments, you need to tell the accountants why you don’t understand their explanation and invite them to try again.

If it’s not vital, trust the accountants and move on.

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23rd Jun 2019 12:32

Is there no-one in a management position at your company who has some involvement, or at least a passing interest, in the accounts? It seems odd (to put it politely) if it's just you ("an untrained bookeeper") and the external accountants handling the whole thing.

Who, within the company, approves the accounts??

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23rd Jun 2019 14:48

As stated above, without further information, it would be a guess to give a precise answer.
However, a couple of pointers could be:
1. This adjustment is made every year so the opening stock will have been adjusted to equal the reported prior year figure.
2. There may be an account that you treat as being an admin overhead but the accountants have treated as a cost of sale. An example of this could be something like fuel oil used by the business. In this case there could be a closing stock of the fuel - so the spend on fuel would be transferred to COS and the opening/closing stocks adjusted accordingly.

Personally I am always happy when these sorts of questions are asked by unqualified members of my staff as it shows that they have a genuine interest in the work that they are doing - so there would be no harm in asking your boss the question.

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to Try_to_help
23rd Jun 2019 16:13

Quote:

Personally I am always happy when these sorts of questions are asked by unqualified members of my staff ....

Absolutely - I certainly wouldn't suggest that you keep on wondering.

Ask the question. But ask it of folk who can give you the answer. We can only speculate.

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to Try_to_help
23rd Jun 2019 18:39

Quote:

As stated above, without further information, it would be a guess to give a precise answer.
However, a couple of pointers could be:
1. This adjustment is made every year so the opening stock will have been adjusted to equal the reported prior year figure.
2. There may be an account that you treat as being an admin overhead but the accountants have treated as a cost of sale. An example of this could be something like fuel oil used by the business. In this case there could be a closing stock of the fuel - so the spend on fuel would be transferred to COS and the opening/closing stocks adjusted accordingly.

Personally I am always happy when these sorts of questions are asked by unqualified members of my staff as it shows that they have a genuine interest in the work that they are doing - so there would be no harm in asking your boss the question.

I have gone into my work emails and double checked against last year's accounts and it's number one. Thank you very much. A very simple explanation that didn't seem to be available from the accountant. I think they may have thought I was asking a different question.

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to Texnophobe
24th Jun 2019 09:10

Thanks for listening to the answers and reporting back. Too many questioners post and run.

You might still want to push them a bit further so that you actually understand why they are making this adjustment.

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to Texnophobe
24th Jun 2019 11:59

That only explains one of the adjustments, but you have three separate ones.

So the adjustment to opening stock was to correct the error in it not being the same as last year's closing stock. The other side of the adjustment was to opening retained profits presumably?

You are left with not knowing:

What was the adjustment to purchases, and what was the other side of the entry? An accrued invoice previously omitted?

Why was the closing stock written down from the figure at which it was originally included? Is the lower figure the right one?

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23rd Jun 2019 16:05

You said "Why is the COS increased ..." and then "... the opening stock, purchases and closing stock are all higher figures than in the TB. They net off the same though...".

Which is it?

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to Accountant A
23rd Jun 2019 18:41

Quote:

You said "Why is the COS increased ..." and then "... the opening stock, purchases and closing stock are all higher figures than in the TB. They net off the same though...".

Which is it?

Sorry I probably should have spent a bit more time on my post and phrased the question differently. What I mean is they have added the same amount to the opening stock and purchases and deducted the same amount from the closing stock. So the cost of sales value is the same as it would have if they used the original figures. For example;

Opening Stock: X +20
Purchases: Y + 10
Closing Stock: Z-30

Thank you for the responses. When I questioned it the external accountants seemed to imply it was a very common thing to do so I was just wondering why but I will simply ask them for a more detailed explanation.

Edit: Problem now solved.

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to Texnophobe
23rd Jun 2019 18:44

Was the opening stock the same as the figure in last year’s balance sheet before or after the above adjustment to it?

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