[GNC] Writing off Stock - More an Accounting Question than a GnuCash one

Jeff GnuCash-List at ratherbe.info
Mon Jun 26 05:01:32 EDT 2023


Thanks Michael and David for the helpful suggestions.

It looks like I was sort of on the right track.  These write-offs will 
be very irregular (have not needed to do any for the last 6 years) so I 
think I'll go along the lines suggested by David.  Just now need to get 
my head around it.

Thanks again
Jeff.

On 26/6/23 06:15, David Cousens wrote:
> Jeff,
>
> The following treatments are generic from a basic accounting textbook and should
> not be taken as accounting advice that is relevant to your specific
> circumstances.
>
> This is the direct write off method:
> You  write it off as an expense to the COGS account i.e credit the
> Asset:Inventory account and debit the Expense:COGS account. This would usually
> be used if the write off amounts are small and irregular. (Using this method can
> distort the gross margin where writeoffs are significant and is not recommended
> for significant writeoffs
>
> You can also create an Expense:WriteOffs account rather than using COGS if the
> amount of the write offs is significant and needs to appear as a line item in
> your reports.
>
> In the allowance method, rather than crediting the inventory account directly
> you set up a contra sub account of the Asset :Inventory account usually named
> something like Asset:Inventory:InventoryReserve and credit that and again debit
> the expense account. This is the usual method where the inventory may have lost
> value but isn't being disposed of immediately.
>
> At actual disposal of the asset the Reserve account is debited and the Inventory
> account is credited.
>
> If the value of inventory falls below its cost, it is usually written down
> rather than written off and a separate expense account Expense:Write Downs is
> used instead of the Expense:Write Offs account.
>
> David Cousens
>
>
>
>
>
> On Sun, 2023-06-25 at 15:42 +1000, Jeff wrote:
>> Hi List,
>>
>> This is more a general accounting question than specifically a GnuCash
>> one, but thought there might be better help on the list for it.
>>
>> Background:
>> I use GnuCash for business use, and track the purchase of inventory.
>> This goes into an Inventory Account
>> When sold, the sale gets recorded against the Income Sales, and the cost
>> of the goods gets recorded in COG's.
>>
>> Issue:
>> I have some stock that is either obsolete, or otherwise no longer fit
>> for sale.  Just wondering what is the "correct" way to write this stock
>> off. (In case it matters, I am located in Australia).
>> My thoughts were:
>> - Have an Account called Write-offs to record the transfer of the dollar
>> amount from Inventory to Write-Offs.
>> - Also, record the cost of goods in the COG's account, just like it was
>> sold.  This is the main bit I am unsure of.
>>
>> Any other suggestions, or am I looking at this completely wrong?
>>
>> Regards,
>> Jeff,
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