Stocks and work in progress

Abstract

In all the examples we have looked at to date we have made some simplifying assumptions in relation to the goods purchased which we refer to as the stock of the business. The first assumption was that no stocks were held at the end of the period. The use of this assumption meant that we had no problem in identifying what stock had been sold or what it cost. It also meant that the question of whether the goods held in stock at the end of the period were still worth what we had paid for them did not arise. We also only dealt with single-product businesses which had fairly straightforward processes for converting the goods purchased into saleable commodities. Finally our examples only dealt with start-ups, i.e. businesses in their first year. This meant that the question of how to deal with the stock held at the beginning of the year did not need to be considered.