How to Write Off Parts Stock

Writing off parts stock can involve either creating a general provision for stock write-downs or writing off specific stock lines. This process ensures that the financial accounts accurately reflect the value of usable stock and any adjustments are properly recorded.

Steps to Write Off Parts Stock

1. Creating a Provision for Stock Write-Down

1. Post a Journal:
   • Debit: Profit and Loss (P&L) account.
   • Credit: Balance Sheet account.
2. Frequency:
   • Post the estimated write-off value as a journal entry each month to maintain an accurate provision for stock write-downs.

2. Writing Off Specific Stock Lines

1. Set Up a Stock Write-Off P&L Account:

   • Create a P&L account specifically for stock write-offs (e.g., "Stock Write-Off").

2. Goods Out the Parts:

   • Remove the parts from stock at full cost by allocating the amount to the P&L stock write-off account.

3. Goods In the Parts:

   • Re-add the parts to stock, but at a reduced value (e.g., £1 each).

4. Nominal Code Setup:

   • In the Nominal Ledger, create a nominal code for posting the write-offs.

5. Post a Zero Invoice:

   • Go into the P&L account and post a zero invoice.
   • Include both debit and credit lines for the goods-in and goods-out transactions.
   • This process ensures the system recognizes the write-off for the difference.

6. Assign Nominal Posting:

   • By default, the system uses nominal code 1.10.40.7 for stock write-offs.
   • You can either leave this as is or remove the default posting and select the specific nominal code created earlier.

Key Notes

• Provision vs. Specific Write-Offs:
  • A provision is used for general estimated stock write-downs.
  • Writing off specific lines is for clearly identified stock with reduced or no value.
• Nominal Code Setup:
  • Ensure a dedicated nominal code is created for stock write-offs for proper financial reporting.
• Zero Invoice Posting:
  • The zero invoice posting reconciles the goods-in and goods-out transactions, ensuring accurate system records.

Example

1. Provision for Write-Down:

   • Post a journal each month:
     • Debit: "Stock Write-Down Expense" (P&L).
     • Credit: "Stock Provision" (Balance Sheet).

2. Specific Write-Off:

   • Goods out: £100 (full cost).
   • Goods in: £10 (adjusted value).
   • Zero invoice posting adjusts the nominal ledger for the £90 write-off difference.