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Sir,while preparing statements, i often come across this adjustment:
‘Stationary valuing $ X was purchased during the year’
It’s kind of vague on what to do, but they minus it from administration expenses probably because they capitalize it as an asset?
Firstly, you cannot be asked in the exam to prepare full financial statements.
Secondly, you will never have seen stationery capitalised as an asset, and you will never have seen purchases of stationery subtracted from administration expenses!! Stationary is an expense (and for a limited company will be included in administration expenses).
What you may have seen is the situation where some of the stationery was still left in inventory at the end of the period. In that case the amount of the inventory will be subtracted from the stationery purchases in order to leave the expense of the stationery used. The inventory at the end of the period would then appear on the SOFP as inventory (but it is never capitalised!).
Thank you for the clarification,sir. I myself was really confused by this, that’s why I asked you, I know that stationary is kind of immaterial to capitalize and was wondering why they subtracted it from administration expenses.
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