Capturing Free Stock Bookkeeping Question

by JayJay
(Cape Town, South Africa)

Free Stock

Free Stock

My supplier has given us free trading stock as an incentive to sell his products.

How do I capture this?

I know that I debit stock but what account should I credit?

Would I need to create an "other income" account for this?

Kind Regards
JJ



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Jan 19, 2024
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starstarstarstarstar 		Handling Supplier Incentives
by: BB

When your supplier gives you free trading stock to boost sales, you'll want to record it in your books. Here's how:

Debit the "Stock" account to show you got more goods.

Credit a special account called "Incentive Stock" to keep track of the freebies.

Creating an "Other Income" account isn't necessary here. This way, you can see how much of your stock came from these incentives.

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Stock for Assets

When I incorporated as s-corp from sole prop i was given 100% of the stock for all assets under sole prop, how do i report this into QuickBooks, is it a loan. I'm confused, Thanks.

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Jan 19, 2024
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starstarstarstarstar 		Smooth S-Corp Transition
by: BB

When you transition from a sole proprietorship to an S-Corp and receive 100% of the stock for the assets, it's not considered a loan. Instead, it's more like a contribution to your new S-Corp.

Here's how you can report it in QuickBooks:

Create an Equity Account: Make an equity account to record this contribution. Call it something like "Owner's Equity - Initial Stock Transfer."

Debit the Equity Account: When you transfer the assets, debit this equity account to increase it. This represents the value you've contributed to the S-Corp.

Credit the Appropriate Asset Accounts: On the other side, credit the asset accounts you're transferring, reflecting the reduction in their value under the sole proprietorship.

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Stocktaking Question

Hello,

I have a question about the stocktake process. In the trading account, there are purchases and opening stock valued at cost, which makes sense. But doesn't a stocktake involve counting all the stock on the shop floor? This would include different VAT rates and profit margins, right?

Let me explain with an example:

Opening Stock: $4500
Purchases: $1123
Cost of Goods Available: $5623
Closing Stock: $2000 (valued at selling price, including VAT and profit margin)
Sales: $4823
Cost of Sales: $3623
Gross Profit: $1200

In this example, the closing stock figure of $2000 includes VAT and profit margin, which seems incorrect to me. The actual cost of the stock on the shop floor is $1223 (the pink figure).

I'm confused about how stocktaking gives the correct gross profit of $423 when the closing stock figure is actually $1223.

Can you help me understand?

Thank you!

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Jan 19, 2024
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starstarstarstarstar 		Closing Stock Figures
by: BB

Great question! The stocktake process can be a bit confusing, but let's break it down.

In the example you provided:

Opening Stock: $4500
Purchases: $1123
Closing Stock: $2000 (including VAT and profit margin)
Cost of Sales: $3623
Gross Profit: $1200

The closing stock figure of $2000 includes both VAT and profit margin, making it different from the actual cost on the shop floor, which is $1223.

Here's how stocktaking helps with the correct gross profit:

Accurate Valuation: Stocktaking involves counting all items on the shop floor, considering varying VAT rates and profit margins.

Cost of Sales Adjustment: The closing stock figure, including VAT and profit margin, is adjusted to the actual cost on the shop floor during stocktaking.

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Value of Stock

by Tehseen
(Manchester,UK)

I have just completed a bookkeeping course and started working with a bookkeeper on a voluntary basis. He has given me some accounts to prepare. One of the things I have to do is determine the stock value at the end of month. How do I do that? I am completely confused.

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Jan 19, 2024
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starstarstarstarstar 		End of Month Stock Values
by: BB

Congratulations on completing your bookkeeping course! Determining the stock value at the end of the month can be a crucial task. Here's a step-by-step guide to help you:

Identify Types of Stock:

Determine the types of stock your business deals with, such as raw materials, work-in-progress, and finished goods.

Count Physical Inventory:

Conduct a physical count of each type of stock at the end of the month. This involves counting the actual items on hand.

Assign Unit Costs:

Assign unit costs to each type of stock based on their purchase or production costs. This will help you determine the total value of each type of stock.

Calculate Total Stock Value:

Multiply the unit cost by the quantity for each type of stock to calculate the total value. Sum up these values to get the overall stock value.

Consider Additional Costs:

Include any additional costs related to stock, such as shipping fees or storage costs, to get a more accurate valuation.

Use a Periodic or Perpetual System:

Decide whether you're using a periodic or perpetual inventory system. Periodic systems involve physical counts at specific intervals, while perpetual systems track inventory continuously.

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