Important Points Related to Opening Stock
1. Proper Accounting Policies to be Followed: For the calculation of opening stock several amendments in guidelines, accounting assumptions, and accounting standards set out different methodologies. Entity should have a key understanding of there applicable financial reporting framework and should follow those principles uniformly.
2. Applicable to Service Industry: Inventory Management is not only applicable on manufacturing or trading concerns, but service industry is also required to keep the opening inventory details. Instances of such are Service providers keeping stock details of printing paper, cartage details, stationery stock, etc.
3. Affect the Profitability of an Entity: An entity should carefully value the opening inventory, as opening stock has effects on profits. Entity should deploy proper resources for the correct reporting and disclosure of opening inventory. Entity can use stock audits to eliminate such risks.
4. Capitalisation of Elements of Opening Stock: The entities are required to capitalise the assets like spare parts and inventory of capitalised assets are also disclosed as inventory in the financial statements apart from the main inventory.
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