Provision for obsolete stock

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Querist : Anonymous

Querist : Anonymous (Querist)

26 March 2012 Why do we need to create provision for obsolete stock? is it mandatory or management discretion? Many products are lying in stock for morethan 3 years but still it can be saleable and usable condition... If we make a provision for obsolete stock, what would be the actual effect on business?

Can anyone please explain the concept of provision for obsolete stock?

CS, Deepak Pratap Singh

CS, Deepak Pratap Singh (Expert)
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26 March 2012 Dear Friend, Obsolete Stock , is a stock which in the decision of management is not saleble or marketable. Then management make a provision for Obsolete Stock.The provision made for Obsolete Stocks during previous year will be reversed if there will be any profit on sale of those stocks.

Anish George

Anish George (Expert)
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22 September 2012 Suppose obsolete stock value is USD 1000 and 100% provision created.During the year the stock was sold for USD 400.How is the accounting treatment.

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