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Inventory days calculation – Provision of stock obsolete

Forums › ACCA Forums › General ACCA Forums › Inventory days calculation – Provision of stock obsolete

  • This topic has 1 reply, 2 voices, and was last updated 1 year ago by AvatarKim Smith.
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  • January 30, 2025 at 4:11 pm #715071
    Avatarcmljames
    Participant
    • Topics: 2
    • Replies: 0
    • ☆

    Question of the use of inventory days in real use.

    To calculate the inventory days = Stocks / Cogs x 365 days.

    Company uses self criteria to provision for stock due to no movements or aged over x years..etc.
    However, it could be sold at normal price.

    Thing is, if a significant amount has been provision or written off from balance, the ratio would give us favorable change (days would decrease with less stock) and it would not reflect the poor management of the stock.

    So question is: if there are provision of stock obsolete, should we reduce the stocks? Or should the stocks (of the formula) be the total amount including whatever stock that has been provisioned as obsolete?

    Thanks and best regards!

    January 30, 2025 at 4:55 pm #715076
    AvatarKim Smith
    Keymaster
    • Topics: 138
    • Replies: 8463
    • ☆☆☆☆☆

    This is the GENERAL forum for non-exam-specific questions – please post to the forum for the relevant exam.

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