Sunday, 2 September 2018

Treatment of stores, spares and packing materials in balance sheet and PL statement

During the normal running of a manufacturing company, there are some materials which are consumed as part of the daily operations, but cannot be considered as part of actual cost of goods sold. These are materials in stores- like stationary, spares- used for maintenance of equipments, and packing materials.

Since they are basically assets of the company and are most likely consumed in a year, they have to be recorded as current assets, and therefore logically in the inventory,

Their inventory is shown in the balance sheet where all other inventory is shown in their respective heads.

Their expense is not calculated in COGS, except sometimes for packing materials, rather, their consumption is shown as an expense in the PL statement, under other expenses. 

Stores and spares are also sometimes capitalised in the balance sheet along with the fixed asset (like machinery) for which they are consumed.

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