Stock losses and gains

[airline]

When you a record a stock loss or gain on a stock card, is it correct that you
・deduct a stock loss from the stock with the larger value
・add a stock gain to the stock with the smaller value

due to the conservatism principle? .....

[nbalakers24]

if there are two different cost prices, the first one bought is deducted/added if there is a loss or gain.

i think.

[sick muzza]

use your good old fifo

[chris1991]

Stock gains are recorded as whatever value it is of the last stock recorded in the out column.

[Fyrefly]

With stock losses, just apply FIFO - the earliest stock is assumed to be lost.

Think about it logically - the longer you have a piece of stock on hand, the more likely it is that it will get stolen.
Like... if I have had 6 packs of razor blades on a shelf @ Coles for 4 months, and another 2 on the shelf for only 1 month, it is far more likely that when it's been discovered that a packet has gone missing that it was 1 of the 1s that was purchased 4 months ago. After all, there's been a whole 4 months for some random to come along and steal it, rather than the shorter 1-month time frame of 1 of the newer packets.


Stock gains are recorded in "reverse FIFO" for the most recent transaction.

For instance:

The last sale involved 20 hairbrushes @ $6, and 5 @ $8 (the $8 1s r the 'newer' stock).
Stock take revealed a gain of 12 hairbrushes.
Stock gain .: 5 hairbrushes @ $8, and 7 hairbrushes @ $6 = $82 (assuming I can still multiply...)

Basically u jst progressively 'undo' the most recent transaction in ur OUT column until u've got the rite amount of stock.


Edit: Mm... yes, I should mention that u *can* apply conservatism to stock gains - this is a recognised and accepted alternative.
Look, 4 the purposes of VCE Accounting, jst master 1 method and stick 2 it.
I find the 'reverse FIFO' method easier, bcoz u're jst going up a column, but if the more conservative approach makes better sense 2 u then use that instead.

[nbalakers24]

stock gain is recorded at the cheapest because of the conservatism principle

[sick muzza]

For a stock gain, use the cost price in the most recent OUT transaction.
A stock gain can also be recorded using the most conservative price: the Study Design does not specify an approach.

 thats word for word from the Cambridge  book  - second edition. page 152/153