costs for all stock items and stocktake

[Cotswold]

If you purchase raw materials for a contract this is usually done on a JIT basis. As it is ordered it will be added to the contract costs. Those items are NOT then in stock, they are in Work-in-Progress(WIP). If there are over orders, unused material, then that will no doubt end up in stock and its value adjusted at each year end (YE) to the current rates. As I have said over and over.

In construction, the main contractor and subcontractors operate from the quotation, or Bill of Quantities (B/Q) which is the start. Then design, buying and production follows. Planning are clueless on cost. They are supposed to issue a plan at the start that will result on the contract completing on time. The work of planning will be corrected as the contract progresses. All of the actual work is covered in production control and with quantity surveyors (QS) checking costs and issuing regular claims for work done to the client. If the contract is on the basis of Cost Plus, that is the only time that back-charging, as you call it would happen.

Accountants need other people to make them look good. They have no knowledge about quotations, production, or purchasing. They are a mainly pointless necessity that only add cost. In a business that is losing money they are hopeless.

The YE stock value should be at the current market rates. Material purchased and labour that is booked to a contract are at the rates paid, with profit added and reside in WIP in the accounts. However, if any stock is used in a contract, it will be charged at the current market rate and NOT at the rate it was purchased.

 

[rainbows]

i agree with that but see below how do you know if these items in stock that are for orders or not what currency they are in so i can do my year end cost ?

 

[arnelgp]

refer to you "pos". you should include both local and international currency when you received it + conversion.
depends also on what method you will use (or implement) as said before if FIFO or moving avg, etc. to calculate your year end cost.

 

[rainbows]

i am still confused . so just to make it more interesting , i go to B&Q and buy paint , wood etc etc . i then go to a supermarket and i buy other things and put them in stock how do i calculate that in my year end if there is not a currency field in every part number in stock ?

 

[arnelgp]

you have "PO" table right? you have currency there and quantity as to how much was ordered and the date ordered.?
also you have a table for the "actual" receipt of the items, quantity, date receipt.
from either of these 2 table you will get the currency on on your inventory table.

if everyday you buy paint, on different prices, and you buy it for 30 days. you don't want to create 30 columns on your inventory table for those different prices?

that is why Documentation is very important. You record everything first, even if you think it is not needed.
Now you need currency, if you have, from the start keep recording all these things it would be very easy.

 

[CJ_London]

they are interested how i will do the stocktake calculation

they should be telling you what the end result of the calculation should be and what basis the valuation is done

In the case of stocks and shares you would revalue on the day because you can sell that stock at that value and the difference between what you paid and what you now value it at represents a potential profit/loss. In the case of stock you are buying to sell at a higher price to make a profit, the value is what it actually cost you- as previously advised based on LIFO, FIFO or standard cost methods. Are you aware of the difference between these methods? What are you going to do when you sell a product? value the cost at the current currency rate?

It is not the place for this forum to tell you how to value your business (of which stock is part of that valuation), that is for management to decide - they have to state the method in their published accounts. If you want to play safe, store both the local and foreign currency costs plus the currency type.

An example - you buy 50 items from Germany at a cost of say 130 euros which cost you £100. You also buy 50 of the same items from the US for $110 which cost you £90.

You now sell 25 of those items for £140. What is your profit? i.e. how much value are you going to deduct from your stock? Are you going to use the German cost of £2 or the US cost of £1.80 per item? Or an average of £1.90? or some other basis such as standard costing?

 

[gemma-the-husky]

they are interested how i will do the stocktake calculation thats why i ask should all the stock be in pounds ot in all of the currencies and how do i show that on the stocklist what currency it is in if i need to do that

The thing is, you shouldn't need to decide. Whoever is specifying this project ought to tell you how you want it to work.

Certainly, If you are a developer inventing a system then it's up to you, but then it would help if you have a thorough understanding of the accounting principles and practices involved.