Find slow and dead stock and value it honestly
Steps 6 and 7 of the stock close: find the stock that is not selling, and make sure nothing on the balance sheet is carried at more than it will fetch, less the cost of selling it. It follows Steps 3 to 5, where the month was closed and locked. The running example is GadgetSphere’s laptops: a model that sold for RM 3,999 in January sells for RM 2,999 by September, once its successor is on the shelf (Meet GadgetSphere).
Step 6: Find the slow and the dead stock
The outcome: a list of stock that is not selling, with a decision against every line.
Stock Report > Stock Aging Report
The aging report assumes the oldest units leave first, and shows what is left by the month it arrived. Two things about how it counts matter before you trust it:
- It always starts on 1 January 2022, and there is no From date to set. The screen sends that fixed start date and replays every receipt, oldest first, up to the Date As you choose. Stock from before 2022 that is still on the shelf is aged as if it arrived with the first movement the report sees, so read the oldest column as “2022 or earlier”, not as an exact age. The month columns count back from the day you run the report, not from Date As. Run it on the 5th working day of April for March, and the first column is April. You know it is complete when, for three items at one branch, the report’s quantity with Date As left at today equals their balance in Stock Balance. If it does not, you cannot widen the range. Judge those items by sales instead, as described below.
- Every movement that adds stock starts a new age, for a branch and for the company alike. A laptop moved from
GS-KV-01toGS-PEN-01in August shows as August stock at Penang, however long it sat in Klang Valley. Running the report for the whole company does not undo this. A transfer passes through the company’s in-transit location, and the report counts that as stock leaving and arriving, so the company view shows the transferred units as August stock too. A customer return comes back as new stock as well. So the aging report cannot tell you how long transferred stock has been in the business, at any level.
BigLedger has no report of stock age that ignores transfers, so GadgetSphere judges slow stock by sales instead of age. The area stock controllers run the Stock Summary Report By Location (Stock Report > Stock Summary Report By Location) twice each quarter: once from 90 days ago to today, once from 180 days ago. Any line with Closing Balance (Include non-movement) above zero and nothing in Sold has not sold at that location in that time. A transfer does not hide it, because transfers are counted under Others, not Sold. Sold counts three document types only: cash bills (the till included), sales invoices and sales returns. An item sold once and returned once shows nothing sold, which is the right answer here. Stock shipped on a Sales GIN Stock Out is not in Sold. A company that ships on a GIN and bills on a Sales Invoice No Stock Out has its sales under Others, next to its transfers, so an item that sold that way still shows nothing in Sold. If any of your companies ships that way (at GadgetSphere it would be the distribution company), check every no-sale line that has a figure under Others before it goes on the list: run the Stock Movement Report for that item and location over the same dates, with Server Doc Type set to INTERNAL_SALES_GIN_STOCK_OUT (the list shows the raw type names; type SALES_GIN in its search box to find it). Any row that comes back with a Doc No and a Qty Out is a Sales GIN Stock Out in the range, which is a sale, and the line comes off the list. Don’t look for it in the Doc Short Code column: that column is blank for a Sales GIN Stock Out, as it is for every document type without a short code.
BigLedger has no rule for “slow” or “dead”, and does not flag anything. GadgetSphere’s rule: no sale for 90 days is slow, and no sale for 180 days is dead, read from those two runs. Each quarter, the area stock controllers send a list with a decision against every line:
| Decision | When it fits | What it does in BigLedger |
|---|---|---|
| Move it to a branch that sells it | One branch cannot shift a model another sells | A transfer. It resets the age at the receiving branch, so mark it on the list |
| Return it to the supplier | The supply agreement allows returns | A purchase return. It takes the stock out at its own price, and that price can move the average |
| Mark it down | It will sell at a lower price | A price change. Nothing happens to the cost until Step 7 |
| Bundle it, or give it away with a sale | An accessory or a superseded model | It leaves stock on the sale, and its cost becomes part of the month’s cost of sales |
| Write it off | It will not sell at any price | An adjustment to the damage account, as in the counting guide |
How you know it is right: every line of this quarter’s 180-day run with stock and no sale is on the dead list, every item on last quarter’s dead list has a decision and a date, and nothing on it is still unmoved and undecided this quarter.
Step 7: Value it honestly
The outcome: nothing on the balance sheet is carried at more than it will sell for.
Stock is valued at the lower of what it cost and what it will fetch less the cost of selling it: its net realisable value. That is the accounting standard: MFRS 102, or Section 13 of MPERS for a private entity that reports under it. BigLedger has no net-realisable-value test and no provision for obsolete stock. It values stock at cost, by the method you chose in Step 2. The write-down is a judgement the finance manager makes each quarter and at the year end, from the list in Step 6. The auditor will ask to see it.
For GadgetSphere, 30 laptops from the superseded model cost RM 3,180 each (RM 95,400) and will now sell for RM 2,999 less about RM 150 of selling costs: RM 2,849 each, RM 85,470 for the 30. That is a write-down of RM 9,930. There are three ways to put it in the books, and each has a cost:
| Route | What it does | What it costs you |
|---|---|---|
| Reset the average cost to RM 2,849 (Stock Adjustment > Reset MA) | Moves RM 9,930 from the stock account to the account you choose, and every later sale carries the lower cost | Permanent. It is company-wide, and later margins on that model look better by the amount you wrote down. Reversing it takes another reset |
| A provision journal: expense against a provision account shown under stock on the balance sheet | Leaves every cost in BigLedger alone. The provision is reviewed and changed each quarter | Nothing ties it to the items. The list behind it lives outside BigLedger and has to be kept with the journal |
| A manual closing value for the month in the company’s fiscal-year stock values (Chart of Account applet): the system’s figure beside a manual one, with a choice between them | Month End Processing uses your figure for closing stock, and next month’s opening, in place of the calculated one | The stock reports and the item costs still show cost, so the balance sheet and the stock reports disagree by the write-down, and somebody has to remember why. It lasts one month: next month’s closing is calculated at cost again, so the accountant re-enters the manual value every month the write-down should stand, before that month’s Month End Processing. A month missed reverses it through that month’s cost of sales. The accountant knows it was re-entered when, in the fiscal-year stock values, that month’s row has Select Manual ticked and a Stock Value (Manual) that is not zero (a zero is ignored and the calculated value is used), and the closing stock in that month’s cost-of-sales journal equals the manual figure, not Stock Value (System) |
We have not settled which of these is the house answer (it is with the product owner). All three are legitimate. For a write-down that will probably reverse (a model with a price promotion coming), the provision journal is the easiest to undo. For a write-down that will not reverse (a model that has been replaced), the reset keeps the item’s cost honest for every later report.
How you know it is right: for the ten highest-value items on the dead list, the carrying value is no higher than the latest selling price, less the cost of selling. The finance manager has signed the list the write-down was based on.
What success looks like for this part
The dead-stock list has every line of the 180-day Stock Summary run with stock and no sale (less any line the Stock Movement Report, filtered to Server Doc Type INTERNAL_SALES_GIN_STOCK_OUT, showed shipped in Step 6), a decision on every line, and the write-down is signed. This is check 5 of the whole close’s success check, and its common mistakes cover every part.
Related documentation
- Closing the Month on Stock: the whole close, with its success check and the common mistakes.
- Costing internals: the valuation methods, and Reset MA.
- Counting Stock and Deciding on Variances: the count that comes before the year-end valuation.