how to officially write off stock.
how to officially write off stock.
Author
Discussion

Batfink

Original Poster:

1,032 posts

288 months

Friday 15th June 2007
quotequote all
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.

Glassman

25,056 posts

245 months

Friday 15th June 2007
quotequote all
Eric Mc will be along shortly...

smartie

2,630 posts

303 months

Friday 15th June 2007
quotequote all
when you value you stock at the end of the year, don't include it!

Stock is valued as the lower of actual cost or 'net realisable value' - if it has no "value" then that it is nil in your stocktake!

Eric Mc

125,768 posts

295 months

Friday 15th June 2007
quotequote all
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.