I'm just doing my weekly accounting, and I am wondering how you deal with materials in your books? I don't usually have much in the way of materials, being mostly maintenance, but I have some fertiliser to add into my books, but I'm not quite sure what it should be put down as, or how it is handled?
I realise it's not a simple expense like fuel, and more of a cost of sales, but how is it handled? Do I just keep a note of the purchase and then as I use a bag add it as an expense for a particular job (cost of sales) until it's all used up?
Also, do people here keep an entry for every payment (ie 10 payments per day) or just put down an amount for sales for the day, like a shop would do?
I realise I should get an accountant at some point, but at the moment my books are really quite simple at the moment, and I quite like doing them, sad as I am.
So, if anyone knows, thanks in advance :)
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Hi Graham, We purchase quite a lot of 'stock', so we have seperate book or spreadsheet. The key thing is to understand from simple accounting, it is classed as an expense.
However the difference is 'stock' not used in the financial year you bought it or subsequent years needs to have its value 'carried forward' to the next year. Until you use it /sell it or write it off (throw it away).
So i might buy 25kg bag of fertiliser, costing £25, I use 10kg this year, so the expense is £10.
15kg is left to use next year, and £15 value is carried forward in the books / ledger / spreadsheet.
For me though, I have Standard Stock Purchases and Specials. A standard item for me would be a 25kg coil of 2.5mm galv wire, that we use for climbing plants. We sell it per metre as when we install it. What we don't use one year, we use the next and so on, with its value c/f carried forward. The expense written down in the accounts would be the purchase cost / value per quantity used.
And a special, is one off purchase or plants.
You mentioned fuel, we write down 'tool fuel' as an expense, however van fuel whilst recorded we don't claim for.
You mentioned payments, I assume being made to you. That is receipts, if we receive 10 payments a day, then that is what we would record.
We have another spreadsheet for 'sales', each year, every visit to a customer is recorded with an invoice number, the last one was 'GSP173002'
If there were 10 payments in a day, the date of sale would be the same but the number would be 3001-3010.
So in accounts, there are sales ledgers, thats what you sell, goods and or services = your gross takings / income
Then purchase ledgers, everything you buy. These get sub-divided into Capital, Expenses and Stock
A cost of sale would include anything you spend money on, including employees.
I do my own books, and its not sad, its savvy.
Maybe claims mileage instead?
This all sounds unnecessarily complicated. I've just bought 40 bags of topsoil----£120.... and I'm sure some will be sitting in the garage for the start of the next financial year. . I just put the whole lot down as general "expenses" now like fuel whether it's used this year/next year or by whom. Lets be honest here............ the money involved here is peanuts, you're not avoiding tax so no-ones really going to care:)
Maybe so Graham, however if you bought that stock towards the end of your accounting year, would that be the same answer?
I take it stage further having seperate sheets for stock allows me to work out margins or % markups. Generally the lower the real cost per unit the higher my markup. e.g I buy vine eyes for the wire for £0.08 and sell at £0.45
Having seperate sheets for different expenses, but in particular 'stock' allows me to see how much of a given product we actually use. And I can say to a supplier, I only want a 40 bags of topsoil today but I typically use 10 tonnes in a year, will you do a better price?
And the tax man, does specifically refer to carrying forward your stock. I.E it asks how much you spent on stock and how much value is to be deducted from that 'expense' that you haven't used in your current FY.
Stock sheets allow control, especially when we have over 600 different plant varieties in one year
Thanks Harry for the question, and Seth for answering it :-)