Stock question

[naved_s9994]

Okay, stock has been damaged. (Memo 23)

EXPLAIN, with reference to the definition of an expense why the stock should be treated as an expense.

[mumakai]

The damaged stock should be treated as an expense as it, represents a decrease in the inflow embodying future economic benefit. As the stock cannot be sold, or must be sold for less than expected.

[Aqualim]

Stock damaged should be treated as an expense as it is an outflow of an economic benefit (stock is damaged, and therefore lost) in the form of a decrease in assets (stock control) and an overall decrease in owners equity (Stock loss expense increase, thus decreasing Net Profit and resulting in a decrease in owners equity)

[Buharrr]

for this scenario, i would probably side with aqualim and say that it is an outflow of economic benefit.

could someone explain why, ... because stock damaged does lose its capacity to earn revenue and thus represents a reduction in inflow of economic benefit.

[naved_s9994]

When I did this I said;
Expenses are consumptions or losses of future economic benefits in the form of
reductions in assets (in this case, stock) or increases in liabilities of the entity.
The consumption must have occurred and can be measured reliably.

I was a bit unsure though

[Akirus]

I'd go with "loss".