STOCK AND STORES Accounts may be defined as records of the quantities of finished goods bought or manufactured, and ready fct Gale without undergoing any fuither process. Stores Accounts are the records of raw material, or partly manufactured goods used in the manu facture of the finished goods shown in the stock accounts.
The object of such accounts is— L To form a check on the stock on hand, and ensure that no stock or stores have been issued and not accounted for through the regular channels.
2. To serve as a guide to the buyer in the concern.
3. To enable interim trading accounts to be prepared without " taking stock." Generally speaking, stock and stores accounts only record quantities— either number, weight, or measure—although in some cases values are also given, but very frequently this is neither possible nor desirable.
The method of keeping stock and stores accounts is practically the same.
The account kept will be debited with the stock at the commencement, and purchases; and credited with sales and stock or stores issued for other purposes, therefore the balance should approximately agree as regards the quantity, with the amount of stock shown in the inventory made at the end of the financial period.
Stock Accounts.—Where specific articles are dealt with, it is possible to allocate to each a stock number, and then when a sale is made to mark off that particular item in the stock book.
This method is only practicable, however, where the goods are capable of particular identification, are bought and sold in the same state, and also are either large or valuable.
Otherwise the account can only record the various goods in bulk.
Concerns where such a system is possible include jewellers, piano and musical instrument dealers, furniture dealers, &c. The form of stock book may be ruled so that separate pages are allocated to each class of goods. All goods inwards are marked with a number, such number being shown on the invoice, so that it is possible to check off the items on the invoices with the account in the stock book to which they are posted.
When a sale is eficted, the stock book reference is entered in the day book, and the goods afterwards marked off in the stock book.
Thus on " taking stock," each article can be ticked off with the entry in the stock account, and, if the stock includes goods of high value, it is very desirable that this should be done at frequent intervals.
The use of the cash columns enables the proprietor to see at a glance the gross profit on each article sold, and is of inestimable value to him when buying further goods or " marking off" for special purposes.
If all the goods are re-entered at each annual stocktaking, it follows that the totals of the purchases and sales columns in the stock book must agree with the respective columns in the sales and purchase journals, if each item has been properly marked off.
Merchants can only keep proper stock accounts if but a few classes of commodities are dealt with, although some firms now record their stock on the card system, using a stock card ruled similarly to the following for each class of article :— primary records which are kept, the balance of the stock accounts corre sponding with the actual stock on hand.
In practice money columns would also be given, so that the cost per unit can be ascertained.
In many undertakings where it is not possible to keep proper stock accounts, a check can be obtained, provided the gross profit in each depart ment is fairly normal, by deducting from the sales the gross profit which should be earned, the difference between the stock at the commencement plus purchases, and the sales less gross profit being the stock which should be on hand.
As, however, goods are frequently not sold at a uniform price, nor subject to the same amount of waste, it necessarily follows that this method is by no means an infallible check, but after it has been in operation for some time, an average rate of differences is obtained, and when this discrepancy is allowed for, the results should prove fairly satisfactory.