A peculier case-pls advice

This query is : Resolved

PANCHAPAGESAN JAYARAMAN (Querist)
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15 March 2011 Dear Professionals,

My respects to you, and I am in need of your guidance in this peculier case.

Being a senior accountant of a reputed company in Angola, I wish to state the following:-

* Ours is an FMCG company, having 35 shops and 5 godowns in its distribution chain.
* All the receipts of goods are made in a main godown and getting distributed to shops and other godowns as per the market requirements.
* While going through the earlier accounts the distribution style was as under.

1. Each Shop was considered as a customer and the transfers were made by invoicing at the selling rate.
2. The cash sales made by each shop was credited to shops account and any fluctuation in prices were given with due effects by passing Debit note or Credit note to get make the receivable amount in tact.
3. At the end of the year, the Physical Inventory was ascertained, and VALUED AS PER THE LAST PURCHASE COST.
4. The value of the inventory was accounted as follows:

Dr. Closing Stock Shops A/c xxxxxx (An account created under sundry debtors for this entry)

Cr. Shop's A/c xxxxx (An account kept as sundry debtors).

* THE CLOSING STOCK OF THE MAIN WARE HOUSE WAS CARRIED OVER AS OPENING STOCK FOR THE NEXT YEAR AND WHICH WAS CONSIDERED FOR P& L PURPOSES.
* THE STOCK WHICH WAS KEPT UNDER SUNDRY DEBTORS WAS ACCOUNTED AS PURCHASES IN THE NEXT YEAR TO SQUARE OFF THE DEBTORS ACCOUNT AND TO INCREASE THE STOCK.

Kindly guide me, how to consider the above said stock in P&L.

Regards

Panchapagesan.J

Neeraj Bansal CA

Neeraj Bansal CA (Expert)
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16 March 2011 Heloo
well for your information whoever be the accountant in the past and Auditor of the company , i htink they had done wrong in accounts

as if u r cnsidring Shops as customers and distributing the goods at selling price. then at the time of finalisation of balance sheet , what ever stock left should be accounted at cost price and notional profit should be reduced