YEAREND ACCOUNTING PROCEDURES Consumable Stores on Hand Grade
YEAR–END ACCOUNTING PROCEDURES Consumable Stores on Hand Grade 10 Accounting Module 10 Lesson 6
CONSUMABLE STORES ON HAND • Consumable Stores consist of items such as wrapping materials, packaging materials, boxes, string, etc. • Such items are regarded as an expense at the time of purchase and are expected to be consumed during the accounting period • However, in most cases, some of these items are not fully utilised during the year • These unused items cannot be treated as expenses but rather as assets (inventories) • Matching principle = the expense must be matched in the correct time period
CONSUMABLE STORES ON HAND • CONSUMABLE STORES ON HAND = ASSET Debit: Credit: Consumable stores on hand “Expense” account
CONSUMABLE STORES ON HAND • Example: On 28 February 2008, the following balance appeared in the Pre-adjustment Trial Balance of Onkio Traders: Trading Stock R 56 000 Consumable Stores R 4 500 Adjustments • A physical count of consumables on 28 February 20. 8 revealed an amount of R 800 on hand.
RECORDING CONSUMABLE STORES ON HAND: JOURNAL GENERAL JOURNAL Debit Consumable Stores on Hand Credit 800 Consumable Stores The expense in respect of consumable stores was R 4 500 But because not all of it was used, part of the expense (R 800) is converted to an asset 800
RECORDING CONSUMABLE STORES ON HAND: LEDGER GENERAL LEDGER CONSUMABLE STORES ON HAND Feb 28 Consumable Stores GJ 800 CONSUMABLE STORES Feb 28 Total bd 4 500 Feb 28 Consumable stores on hand GJ 800
RECORDING CONSUMABLE STORES ON HAND ACCOUNT DEBIT ACCOUNT CREDIT ASSETS = OWNER’S EQUITY + Consumable Stores on Hand Consumable Stores + R 800 LIABILITIES • The amount used in the current financial year is R 3 700 (4 500 – 800). This amount represents the expense in respect of consumables for the year. • R 800 becomes stock at the year-end. This amount is reversed on the first day of the next financial period to the Consumable Stores account.
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