negative value of stock

Loss on Metalic Powder A/C  shoud be debited for 10,000 rupees and Metalic Powder A/C should be credited for the same.

Stock should be valued at NIL. and the expense which is to be incurred in future for Rs. 10,000/- need not be considered and the same needs to be accounted and charged to P&L as and when incurred.

Stock should be valued at NIL. and the expense which is to be incurred in future for Rs. 10,000/- need not be considered and the same needs to be accounted and charged to P&L as and when incurred.

Stock to be valued at Nil & provision for expense may be taken to the extent it is expected to be incur i.e. Rs 10,000 in given situation

Thanx for answering my query.

Dear Shikha, When you consider the value  of the Metallic Powder to be Nil, that metallic powder no longer remains 'stock' and it takes shape of a garbage,hence to think that the expenses on removal Rs. 10000/- when deducted from NRV Rs. NIL will give negative value is a based on wrong footing.The amount spent on removing garbage is to be debited to P&L account.

So far as the accounting entry is concerned,you need not pass any entry as you must have already debited your Metallic Powder opening stock account  by the value at which it was valued last year and your Manufaturing account will be debited to that extent automatically.