What do you reckon, should materials be written down if they’re slow moving? The answer to this question isn’t as black and white as you may think.

When it comes to finished goods, the answer is more inclined towards “yes” since they’re first off slow moving which indicates they’re more likely to be sold lower their cost, and more so since they’re finished items from raw materials. It’s not that easy to use those goods for something else, i.e. scrap them to materials.  Continue reading →

Similarly to transportation expenses which are included within the cost price of a stock item, so are the import and other taxes you won’t be able to get back from the state and / or tax authorities. As IAS 2 puts it: “The costs of purchase price of inventories comprise the purchase price, import duties and other taxes (other than those subsequently recoverable by the entity from the taxing authorities).”  Continue reading →

Transportation cost is something you’re quite probably paying on your items as you purchase them. Regardless if you’re transporting them on your own, you buy the service from someone or you let your supplier to transport the goods, you’re still encountering expenses related to transportation.  Continue reading →

Say you’re using machinery for which you occasionally need spare parts to keep the equipment up and running. It is one thing if you buy the spare parts as they’re needed (they’re expensed in such a situation as they’re bought), however what if you have stocked on some of the parts since they’re either harder to get or the shipment period is too long for the production / usage of the machine to be halted.

Those spare parts may “move” that is they’re used very rarely and only if your equipment breaks down. Should those items be accounted as slow moving stock and valued to zero in your inventory? It is one way to look at the matter, however there’s also another option.  Continue reading →

Something to note in your everyday accounting is that your inventory should always be accounting it’s lower or either cost or net realisable value. I know that you may have already known that, but are you really accounting your inventory accordingly?

If you’re adding some expenses to your cost of inventory you’re treating it most probably pretty accurately. That is of course if those expenses are really relating to inventories at hand. However, when you’re comparing the cost against the selling price of this specific item, are you earning profit or loss? Is the realisable value higher than the cost?  Continue reading →

You buy a material that’s say 5 sq. m and you will cut out something that’s only 4 sq. m from the original material. How much will the 4 sq. m cost for you?

Mathematically it would cost less since you’ve got less material, namely 25% less. If you had bought 4 sq. m materials, you would only have paid for the amount you actually used.

However, if you buy 5 and only use 4, your expense is for the 5 you need to account. You bought 5 sq. m materials to get 4 sq. m. Your expense hence is for the full 5 to get only 4 sq. m.  Continue reading →

“Slow” is such a subjective term in nature so the question of what can be considered as slow moving goods is actually quite relevant.

Normally something you’d assess is whether the goods have moved out at all during the reporting period or other relevant period, i.e. quarter. If they have not, I would say they’re “non-movers” so more than likely they will need a provision to cover for future expenses when they’re finally either sold or scrapped or whatever depending on the industry.  Continue reading →