How do I deal with a stock write down?
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Summary
The following article explains how to deal with stock write down.
More Information
There may be times when you need to de-value your stock on the balance sheet. This may be due to a number of reasons, e.g. stock that has been in the system unsold for a number of years. To do this, you need to perform the following steps.
Setup
- Decide on the figure you wish to reduce your stock value by.
- Create a new nominal code to sit along side the one for stock value (typically Z922) and call it "Stock Provision". Z9221 would be suitable. The centre would need to be set as a Balance Sheet centre and flagged as an Asset/Liability.
- Reduce Z922 (The centre for stock value) by the figure decided above and journal to Z9221 (the new centre for stock provision).
Monthly Routine
- Run a stock profit report for the month and make a note of the total cost of sales for that month.
- Journal that cost of sale from stock provision to stock value. This has the effect over time of bringing back into line your stock value.
