First year of trading & stock!

jezabel

hello...first of all i have to thank all the people that so kindly answered my previous threads...thank you very much for your help!! Much appreciated!!

i know now that you have to calculate the cost of sale, however i was wondering one thing.

1) when i started the business (i mean the first year of trading) i did not have much stock so i bought some stock with the first profit i earned, is even the first stock automatically just stock carried forward for the next year of trading until you sell it or (so you cannot deduct it from the gross profit) or for the first year you are allowed to deduct some part of stock value from the gross profit as general costs.

i mean: I bought £300 stock when i started the business
my estimate profit was £1500
can i deduct for the first year of trading:

1500 – 300 = 1200 so this is the net profit for my first year of trading or the 300 stock value is only stock i keep in business until i sell it as stock at hand.

2) finally when i started the business i sold some books i bought before starting trading (books i bought few months or maximum 2 years before), i still have some receipts with the actual cost i paid for the books…am i allowed to deduct the cost of the books i sold from the total stock value or if i bought the books before starting the business i cannot do that?

i just wanted to be sure! Thank you again for your help!!

thank you for letting me know… regards liz

fengirl_2

No, you can only deduct the cost of stock sold from your income.
As has previously been explained, the cost of stock sold is worked out as opening stock, plus stock purchased, less stock on hand, eg opening stock nil (if its your first year) plus purchases £300 less stock on hand £100 = £200.
So if your turnover is £1000, you deduct £200 for cost of sales along with your other costs. You dont deduct the cost of sales from your profit.
The stock you introduced into the business is introduced at cost, so instead of your opening stock being nil (per my example above), it would be whatever the cost of the books you started with were.