The term stock can mean a variety of things. But in accounting, it can mean a couple of different things.
Stock in accounting can mean the:
- Value of goods a business has on hand to sell to its customers;
- Shares of a Company.
What is Stock of Goods?
Goods which a business buys with the intention of selling onto its customers are classified as stock.
Valuing Stock of Goods
When it comes to valuing stock, the amount it is worth is not the amount it could be sold for.
The cost is:
- Purchase price;
- Incidental costs of shipping;
If in Example 1 above the cost of delivering the job lot of perfume to Sams warehouse cost £100, then the total cost of the stock would be £1,100.
Sam runs a cosmetics business buying and selling makeup and perfumes. Sam buys a job lot of perfume to sell to his customers for £1,000.
The value of Sams stock is £1,000.
Mark runs a consultancy business selling time by the hour to his customers.
Mark has no stock as this business does not buy and sell any product to their customers.
Updated 13 September 2019