Stock reserve

789 views 1 replies

Hello Seniors,

Can anyone please explain, is Stock Reserve a Capital or Revenue Loss ?

Thanks & Regards,

N N.

 

Replies (1)

Following from https://wiki.answers.com/Q/What_is_stock_reserve

Many a times, it so happens that a manufacturer, consignor or a head office does not directly engage in selling its products. It instead sends or consigns the goods to a profit centre--a dedicated centre for selling its products. The profit centre in case of a consignor is a consignee and in the case of a head office, its branch or retail outlet. Now when the principal sends the goods to the profit centre, it issues/transfers the goods at a price which is higher than the cost of production of those goods. This price is generally called Invoice Price (I.P.) and this is the value at which the branch/consignor records the receipt of the same. When the branch sells these goods it sells at a price greater than the I.P. thus earning a profit which has two components-- 1.The mark up on the cost of production (i.e., the difference between the I.P. and the cost of production), and 2.The profit made by the branch/consignee (i.e., the difference between seeling price of the branch and I.P.) At the end of the accounting period, any stock is lying unsold with the branch/consignee is having the value of I.P. (at which the head office/consignor had issued the goods). But as per AS-2, inventory can only be valued at cost or NRV, whichever is lower. The excess mark-up on the value of the goods needs to be removed as that is unrealised profit. This unrealised profit is given a name in accountancy - STOCK RESERVE.

Therefore can be cncld. as revenue loss. actually loading i.e., profit element is removed and transfered to Stock Reserve, which will be again gets transfered next financial year to related branch.

Leave a Reply

Your are not logged in . Please login to post replies

Click here to Login / Register  

Company
ARTICLESHIP 08 June 2026
Internal & Taxation Article

O P Bagla & Co LLP

New Delhi

CA Inter

View Details
Company
ARTICLESHIP 18 June 2026
Article Assistance

RB KESHRI & CO.

Mumbai

CA Inter

View Details
Company
20 June 2026
Assistant Accounts Manager

Fintax Professionals

Gurgaon

CA Inter

View Details
Company
24 June 2026
Chartered Accountant - GST & Direct Tax

APL

Mumbai

CA

View Details
Company
ARTICLESHIP 30 June 2026
Taxation Content Writer Intern

Interactive Media Pvt Ltd.

New Delhi

CA Inter

View Details
Company
22 June 2026
Accountant

Global Image Technologies Private Limited

New Delhi

MBA

View Details
Company
29 June 2026
ACCOUNTANT

SANDEEP AASHISH & CO

Araria

B.Com

View Details
Company
09 June 2026
Accounts Associate

S Madan and CO

New Delhi

Graduate (Any)

View Details