EXCESS STOCK AT CONSIGNEE AGENT GODOWN

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

19 March 2010 AT THE TIME OF PHYSICAL STOCK VERIFICATION FOUND EXCESS STOCK IN SOME ITEMS AND SHORT STOCK IN SOME ITEMS AND CAN'T FIND THE REASON FOR IT. THEREFORE REQUIRED ADJUSTMENT IN CONSIGNEE ACCOUNT.

WHAT IS THE ACCOUNTING TREATMENT TO ADJUST THE EXCESS STOCK AND SHORT STOCK?

CA. B.SRINIVASULU

CA. B.SRINIVASULU (Expert)
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20 March 2010 A consignee stock cannot show like that. First you reconcile the account of consigee.

Querist : Anonymous

Querist : Anonymous (Querist)

20 March 2010 AFTER RECONCILATION NOT FIND THE REASON FOR IT, SHORT STOCK MAY BE STOLEN OR DAMAGE AND MAY BE TREATED AS LOSS BUT WHEN EXCESS STOCK THAT CANT FIND THE REASONS THEREOF. SO REQUIRED TO ADJUST AND HOW ?

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Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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21 July 2024 Adjusting excess stock and short stock found during physical verification in accounting involves different treatments based on the nature of the discrepancy. Here’s how you can handle each situation:

### 1. Excess Stock Adjustment:

When excess stock is found during physical verification and the reason cannot be determined, it typically implies that there was an overstatement of stock in the records. Here’s how to adjust for excess stock:

- **Adjustment Entry:**
- Debit the Inventory (Asset) account for the excess quantity found.
- Credit the Inventory Overstatement (Expense or Loss) account for the same amount.
- This adjustment reduces the Inventory asset on the balance sheet and recognizes the excess as an expense or loss in the income statement.

- **Accounting Treatment Example:**
- Suppose you find 100 units of a particular item in excess:
- Debit Inventory (Asset) account: 100 units
- Credit Inventory Overstatement (Expense or Loss) account: 100 units

### 2. Short Stock Adjustment:

When there is a shortage of stock and the reason cannot be determined, it suggests that there was an understatement of stock in the records. The treatment for short stock is typically as follows:

- **Adjustment Entry:**
- Debit the Inventory Shortage (Expense or Loss) account for the quantity of stock found short.
- Credit the Inventory (Asset) account for the same quantity.
- This adjustment recognizes the shortage as an expense or loss and reduces the Inventory asset on the balance sheet.

- **Accounting Treatment Example:**
- Suppose you find 50 units of a particular item in short:
- Debit Inventory Shortage (Expense or Loss) account: 50 units
- Credit Inventory (Asset) account: 50 units

### Additional Considerations:

- **Loss Recognition:** If the short stock is due to theft, damage, or other reasons that can be identified, it may be treated as a loss instead of adjusting directly to the Inventory account. Consult with your accounting standards and policies to determine the appropriate treatment.

- **Documentation:** Maintain proper documentation of the physical verification results, adjustment entries, and any supporting evidence or reports.

- **Reporting:** Ensure that the adjustments are properly reflected in your financial statements to accurately represent the true value of inventory and any associated losses or expenses.

By following these accounting treatments, you can adjust for excess and short stock found during physical verification effectively, even when the reasons behind the discrepancies are not immediately apparent. If there are significant discrepancies or uncertainties, it may also be prudent to investigate further or seek advice from a qualified accountant or auditor.