Writing off damaged, expired and missing stock
Stock adjustments in Achekam change quantities but not the ledger. How a shop works out and posts the journal that writes lost stock out of its books.
By Achekam · · 4 min read · For Retail businesses in South Africa, Nigeria, Kenya
Every shop loses stock. Yoghurt passes its sell-by date, a carton of glasses arrives smashed, a jacket disappears from the rail, a count finds three fewer phone chargers than the system thought. The physical loss happens whether or not anyone records it. The question is whether your books admit it.
In Achekam, they do not admit it on their own. A count or a wastage record corrects the quantity the till sells from, but the value stays in your inventory account until someone posts a journal. This article explains why, how to work out the write-off, which account to charge it to, and how to keep inventory in the ledger in line with what is really on your shelves.
Damaged, expired, stolen or simply miscounted
It helps to know why stock left before you decide how to record it:
- Damaged in the shop or on delivery.
- Expired, past its use-by or sell-by date.
- Stolen, by customers or staff.
- Miscounted: never really there, because of an earlier counting or receiving error, or sold under the wrong product code.
The first three are real losses. The fourth is a correction of an earlier mistake, and sometimes it goes the other way, as a surplus. All four end in the same kind of journal, but knowing the cause tells you whether to fix a process or just the books. Investopedia's explainer on shrinkage describes how this gap between book and physical stock arises, its usual causes in theft, error and damage, and how regular inventory audits reduce it.
Recording the quantity: counts, and wastage on transfers
There are two ways the quantity side gets corrected in Achekam, both with the Warehousing add-on:
A stock count. A count sets a location's quantity to what was counted and records the difference as an adjustment. Damaged and expired goods are removed from the shelf and the count records what is left; stolen and miscounted goods show up as shortages.
Wastage on a transfer. Transfers between locations go from draft to dispatched to received, and a short delivery is recorded as wastage. If the warehouse sends twenty cartons and the shop receives eighteen, the two missing cartons are recorded as wastage.
Either way, you now have a list of quantities that left the records. That list is the basis for the journal. How to run the count itself is covered in running a stock take.
The journal that moves the value out of inventory
Stock counts, wastage, transfers and opening quantities do not post to the general ledger. Only till sales and till returns move the inventory account. So after the count, inventory in the ledger still includes the cost of the goods that are gone.
To fix it, work out the value of the losses and post a manual journal:
- Take the list of shortages from the count adjustments and the wastage records.
- Value each line at the product's cost price, the same single cost price the till uses for cost of sales.
- Add up the total, and keep the working.
- Post the journal: debit your stock losses account, credit inventory (1300).
Valuing at the product's cost price matters. Cost of sales on every till sale uses that figure, so writing off at the same figure keeps the two consistent. If cost prices on some products are out of date, agree with your accountant whether to adjust.
If the count found surpluses that you have confirmed are real, the same working gives the opposite entry for those lines.
Choosing the expense account for stock losses
Where the write-off goes is a decision to make once, with your accountant:
| Option | Effect |
|---|---|
| A separate "Stock losses" expense account | Losses are visible on their own line, below gross profit or as part of cost of sales in your reports |
| Cost of sales (5000 or 5100) | Gross margin reflects the full cost of what left the shop, sold or not |
A separate account has one clear advantage: shrinkage becomes visible month by month. Whichever you choose, use it consistently, so this month's margin compares fairly with last month's. How these entries affect the margin you read is covered in reading your shop's gross margin from the books.
Ask your accountant, too, whether any kind of loss has tax consequences in your country.
Posting into an open month
A business can post manual journals. An unbalanced journal is refused, and so is one dated in a closed month. A posted journal is corrected only by a reversal.
Months can be soft-closed, hard-closed and locked, and a closed month refuses postings from every source; reopening a hard close needs a second approver. So count and write off before you close the month, and date the journal in the month the count took place. If you find an error after posting, reverse the journal and post a new one rather than trying to edit it; see correcting a posted journal.
Comparing the inventory account with the counted value
After the write-off, one comparison tells you whether the books and the shelves agree:
- Counted value: every product's counted quantity times its cost price, added up across locations.
- Ledger value: the balance on the inventory account at the same date.
If they agree, or the difference is small and explained, the books are in good shape. If the ledger is still well above the counted value, something else is keeping value in inventory: unwritten-off losses from earlier counts, stale cost prices, or stock bills coded to inventory at prices higher than the products' cost.
After your next count, work out the value of the shortages, post the write-off before the month closes, and set the counted value beside the inventory account the same day.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
