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Hi Sir, I want to ask about when there is an closing stock last year and carried forward to this year as the opening stock. For example, the opening stock figure is 5000. This stock will be totally written off due to stock obsolescences which means that the closing stock figure must be 0.
Revenue= 6k,and there is no new purchase during the year.
How does it present in SOPL? Is that so?
The double entries = Dr stock written off 5000, Cr Opening Stock/Cost of Sales 5000SOPL
Revenue 6000
Less: Cost of sales: Opening Stock –
Purchase –
Closing stock –
Gross Profit 6000Expenses:
Stock written off (5000)
Operating Profit 1000Hi,
It isn’t a bit of an odd example as I’d question the write down of inventory due to obsolescence when we are then selling it for 6,000.
If inventory has fallen in value then we would account for it in our closing inventory journal. The inventory would be valued at the lower of cost and net realisable value, so here the NRV would be nil.
Thanks
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