Importance of Stocktaking in
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Transport Accountancy
The Third Instalment of a Series of Articles on Keeping Hauliers' Accounts, Previous Contributions Appeared in Our April 17 and June 5 Issues
By
S. Howard Withey, F. CL
(Senior Fellow of the International Accountant; and Executives' Corporation.)
AT the close of the transport owner's working year, and, indeed, at any other time when it is desired to prepare a balance-sheet exhibiting a true view of the state of affairs, it will be necessary to undertake the somewhat tedious work of stocktaking. So much will depend upon the methods employed, and on the accuracy of the stock records, that careful consideration should be given to the apportionment of the various operations.
In the first place, the details of all the stock should be set down on loose sheets, before any attempt is made to classify the items or to summarize the totals. On the top of each stock sheet should be shown the name of each garage, warehouse, shop or store, one person being detailed to call out the
a. quantities, descriptions, and specifications of the vehicles and goods in each garage, etc., and another person allocated to enter these particulars on the sheets.
Pricing Out Details.
The manager of the order or purchasing department should be responsible for the pricing out of the details, all the calculations and the additions being checked by clerks or assistants who have not made them.
Considerable care is necessary in order to guarantee that nothing of the following nature is set down on the stock sheets :---(1) Any goods or passenger vehicle, or any asset, such as machinery, plant, tools, appliances, furniture and fittings, etc., the value of which is already shown in separate accounts kept in the transport operator's impersonal ledger.
To include in the stock any vehicle, goods or asset shown as debit balances in the books of account would cause an inflation of the credit side of the periodical profit and loss account, as well as an inflation of the assets side of the balance-sheet.
False Net Profit.
(2) Vehicles or goods which have been received on trial or approval, or for sale on a commission basis, and the value of which has not been included in the periodical purchases, or credited to the person. firm, or company from whom they were received. The effect of taking into stock any vehicle or goods in respect of which no invoices have passed through the books is to show an excessive balance of net profit in the final accounts.
(3) Vehicles or goods which have been sold prior to the last day of the accounting period, but which have not been actually delivered. As the sales would appear in the day-book during the period under review, to include B42 such vehicles or goods on the stock sheets would cause an inflation of profit, or an undue deflation of loss.
Where a vehicle or fleet has been purchased by the operator a few days before balancing time, and is not on the premises at stocktaking time, its value may be shown on the stock sheets under the heading of " Vehicles in Transit." The same amount must be included in the periodical purchases. The alternative method is to omit the value of such vehicles from both purchases and stock.
When Market Prices Vary.
The usual basis for stock-valuation purposes is the cost price of the different vehicles or goods. If, however, in any instance, the prevailing market price has dropped below actual cost, the items should be priced out at the current manufacturing price level. When prices have risen, either permanently or temporarily, the cost price should be the basis of valuation.
Vehicles which have become shopsoiled, and goods which, for any reason, are old-fashioned or non-effective, should be priced out at their estimated value at the time of stocktaking, or at cost price, whichever is the lower.
Having recorded on sheets the details of all stock, the next step will consist of classifying the records. In some cases, and epecially if a manufacturing business is being carried on in addition to goods or passenger services, the stock could be classified to show the total value of (a) finished or fully manufactured vehicles or goods, (h) work in progress, and (c) partly finished or semi-manufactured vehicles or goods, etc. Unless separate goods or trading accounts be kept, it will be sufficient, for all practical purposes, to show one grand total for the stock. . Each person taking part in the stocktaking operations should sign for . the particalar work performed, the sheets as a whole being signed by the operator, one of the partners, or other responsible official. The total value will have to be certified either by the operator, each partner, the manager, or the directors, as the case may be. A good general form of stock certificate is reproduced below:—
" I (or we) hereby certify that the stock on hand at March 31, 1936. was. valued at net cost price, and amounted to four thousand nme hundred and sixty pounds, eleven shillings and sixpence (£4.960 lie. 6d.).
" (Signed) "Manager to ...... . . ............
Where applicable, detailed certificates should be shown directly above the operator's or managerial certificate, these being written in the following terms
" I hereby certify that the stock on hand at March 31, 1936, as taken and classified by was correctly entered by me on the stock sheets.
" (Signed)
When preparing a trial balance for the purpose of proving the clerical accuracy of the entries made in the books of account, the value of the stock as at the commencement of the year or period should be shown as a debit balance. The value of the stock at the close is in the nature of an adjustment entry, in order to ascertain the amount of profit made, or the extent of the loss sustained.
As a rule, it is found convenient to enter the total value in one amount in a stock account (as illustrated), kept in the operator's private ledger, the amount being transferred to the debit side of the following year's profit and loss account.
Profit and Loss Account.
The value of the stock at March 31, 1935, viz., £4,163 19s. 2d., would be shown on the credit side of the profit and loss account for the year ended March 31, 1935, and as the opening entry on the debit side of the profit and loss account for the year ended March 31, 1936. In like manner, the value as at March 31, 1936, viz., £4,940 us. 6d., would be credited to the profit and loss account at -that date, and would be included on the assets side of the balance-sheet.