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TonyTax
TonyTax, Tax Consultant
Category: Tax
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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Hi. I run a fuel company. My software runs a report which

Resolved Question:

Hi.
I run a fuel company. My software runs a report which showsthe actual amount of gross profit made on each litre of fuel. Eg. In month of November 150k litres sold. Actual profit was 5k.
However when I calculate the gross profit using the accounting method. Sales less cost of sales I get a much less figure (This method takes opening and stocks into account). I think this is because unlike many other stock types fuel price changes on a daily basis. The fuel price at the end of the month was less than at the start. So closing stock value was less. However this wasn't the same fuel (unsold) which I had at the start of the month. Basically I cannot understand how just because the fuel price is less at the end of the month that it means I made less gross profit. I base my pricing on a margin eg. 2p per litre on to the cost price. So I assume no matter what the fuel price is I would be making the same profit.
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.
Hi.

In your type of business its a case of swings and roundabouts as far as your fuel stocks are concerned I'm afraid. I'm not aware of a different way of accounting for closing fuel stocks but other fuel company operators you know may use another method.

You know off the top of your head how much profit you make per litre, the difference is just the way the accounts deal with stock valuation and your stock probably won't only include fuel. Your closing stock is normally taken as the lesser of its actual cost or its market price on the last day of the accounting period as you can read here and here (see under How is the value of closing stock ascertained).

I hope this helps but let me know if you have any further questions.
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