Accounting for closing stock when buying mixed lots at auction

Hi,


I buy and sell items from auctions, a lot of what I buy is mixed lots, for example I may buy something for £42, but it has 10 items in it, all of which I will list for sale at differing prices.


I have been accouting the £42 as an expense for the month purchased, but I'm not sure if this is the accurate way of doing it?


I may sell 6 of the items for £80 in which I'm currently accounting that as a £38 profit (these are very loose figures, obviously there are other expense factors), but then I also have 4 of the items left, so in factual terms, the cost of goods is not really calculated correctly.



Question is, come year end and completing my self assesment, will this way cause me an issue?


If it will, what's the best way of determining the value of stock held after when the items all have differing values.



Thanks in advance for any advice.

Comments

  • Pennywise
    Pennywise Posts: 13,468
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    Forumite
    The answer depends on whether you're a sole trader or a limited company. If you're a sole trader, what "basis" will you be declaring your accounts, you have a choice of "cash basis" or "accruals basis". If you're a sole trader on the cash basis, you don't need to adjust for the value of closing stock, so just claim the amounts paid in the year you paid them. (But cash basis has other pros and cons too).
  • jeid2018
    jeid2018 Posts: 8 Forumite
    I have been using the "cash basis" so far.


    I don't really have any sales or expenses that aren't instantly paid for so it seems to have suited.


    My only worry was that I have items from lots that sit around for a long time and potentially don't sell, they've been accounted for as an expense from the figure of the whole lot, affecting my taxable profit, yet I may actually never sell them.


    Just wanted to make sure this was a legitimate way of doing things.
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