how to officially write off stock.
Discussion
no not trying to dodge tax but we have had a few items returned as they are faulty. Its not going ot be cost effective to send the product back to America where is was manufactured so what do I need to do to officially write of stock through my books.
I have only been in business a few months so am learning as I go.
I have only been in business a few months so am learning as I go.
The cost of purchasing the stock is already included in your "Purchases" or "Materials" heading in the Profit and Loss account. As you have decided that you can't sell it and don't intend to sell it, as described above, you just don't include it in any valuations of Closing Stock at the end of the accounting year. That will effectively "write it off".
The assumption in "writing off" stock is that the stock will probably be junked and disposed of for "Nil" proceeds. If you think you can sell it but at a much reduced value, and a value less than what you paid for it, you wouldn't write it off but what you would do is retain it in your Closing Stock figure but revalued at an amount closer to its expected Sale Value rather than its Purchase Cost. This would be a Stock Write Down, rather than a Stock Write Off.
The assumption in "writing off" stock is that the stock will probably be junked and disposed of for "Nil" proceeds. If you think you can sell it but at a much reduced value, and a value less than what you paid for it, you wouldn't write it off but what you would do is retain it in your Closing Stock figure but revalued at an amount closer to its expected Sale Value rather than its Purchase Cost. This would be a Stock Write Down, rather than a Stock Write Off.
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