Tag Archives: inventory

Year-end stocktaking

Software: MoneyWorks accounting software

A stocktake is a physical count of your inventoried items and is necessary on a periodic basis, no matter how careful you are, the actual stock on hand may differ from the record in MoneyWorks accounting software.

The steps taken are:

  • Enter and post all stock related transactions in MoneyWorks.
  • Backup company file.
  • Click the start stocktake process button.
  • Print the stocktake list report from the reports menu for the physical stock count.
  • Enter the stock count into the count column.
  • Highlight all the items and click the finish stocktake button to finalise the stocktake.
  • Print the stock valuation report.
  • Lock up the financial period.

MoneyWorks create a snapshot of the current stock on hand once you clicked the start stocktake process button. Any stock related transaction posted after the start stocktake process will not affect the snapshot quantity, and the calculation of the quantity differences are between the quantity count and snapshot. It’s important to hit the start stocktake button on or before the financial year-end to allow the accounting software to capture an accurate quantity on hand, although you may not enter the count quantity immediately.

stocktake

MoneyWorks will prompt to record a stock journal once you have finished the stocktaking, it will debit/credit from the inventory asset to the stock adjustment account stated in the journal. Then, print a stock valuation report and lock the financial period after completing the stocktake.

Stocktaking is an important process, consult your MoneyWorks consultant if you have doubt.
Reference: page 348 of the MoneyWorks version 8 User Guide, Stocktaking

 

 

Inventory cost adjustment

Software: MoneyWorks accounting software

The cost of sales of an inventory item realised when the product sold, whereas the non-inventory item realised upon purchase.

The purchase invoice debit the cost of sales account and credit accounts payable when a purchase invoice of the non-inventory item has recorded. Non-inventory item used in drop-shipping businesses, back-to-back, or project kind of order, which you do not track the inventory as the purchase made is fulfilling a specific customer order.

Inventory item is different, you purchase in bulk and sell it slowly to various customers. It debits the inventory assets (in Balance Sheet) and credit accounts payable account when purchase invoice has recorded. It debits the cost of sales and credit inventory assets account when sold.

The complexity comes in when you recorded an item as a non-inventory, sold it to a specific customer, being rejected and returned by the customer, and you converted it to stock (inventory assets).

Assuming you purchase a non-inventory item Ni-101 at $1000 for a customer, It debits the Cost of Sales and credit Accounts Payable account at $1000.

The customer returns the non-inventory item Ni-101 and exchange for an inventory item S-200, which has the same selling price and cost as Ni-101 on the following month.

You decided to stock up Ni-101 by creating a new product code Ni-101S (inventory item) since the original product, Ni-101, is a non-inventory item.

Method 1:

You can create a sales invoice for S-200 to reduce the stock on hand at $0 amount and a negative quantity of Ni-101S with $0 to add the stock back. This invoice:

Debit Accounts Receivable $0
Credit Sales (S-200) $0
Debit Cost of Sales (S-200) $1000
Credit Inventory Assets (S-200) $1000

Debit Sales (Ni-101S) $0
Credit Accounts Receivable $0
Debit Inventory Asset (Ni-101S) $0
Credit Cost of Sales (Ni-101S) $0

There is no movement of inventory asset value or cost of sales when Ni-101S adds to the stock on hand. The cost of sales has already realised earlier when the purchase invoice of Ni-101 has recorded.

The margin of Ni-101S will be 100% if the item sold.

This method shows a conversion of non-inventory to an inventory item, focus on the stock on hand but not the realisation of the cost of sales and stock valuation. For example, the cost of sales realisation of Ni-101 (non-inventory) could be in period one, whereas the sales or Ni-101S (inventory item) could be in period three.

However, if you prefer to realise the cost of sold of item Ni-101S upon item sold, then you may consider method 2.

Method 2:

This method requires using a purchase invoice to adjust the item cost of Ni-101S. First, you create a product (only checked the checkbox for ‘We Buy This’), name it as COST_ADJ (or something which you preferred) and link the cost of sales to the expense account field.

Cost adjustment product

Then, create a purchase invoice (you may create a creditor and code it as COST_ADJ) with Ni-101S in line one and COST_ADJ in line two. Ni-101S with quantity and value of $1000, this is to stock in and update the product cost. Whereas COST_ADJ is a negative quantity and value to reduce the cost of sales. The purchase invoice:

Debit Inventory Asset (Ni-101S) $1000
Credit Cost of Sales (COST_ADJ) $1000
Credit Accounts Payable $0

Adjust product cost

Next, create a sales invoice to the customer for inventory item S-200 with $0 selling price to indicate an item sold to the customer. This sales invoice:

Debit Accounts Receivable $0
Credit Sales $0
Debit Cost of Sales (S-200) $1000
Credit Inventory Asset (S-200) $1000

Sales invoice for goods exchange

In future, MoneyWorks will debit the cost of sales and credit inventory asset $1000 when item Ni-101S sold.

Method 2 is a better solution as it gives an accurate stock valuation.

Join my training to understand how to utilise MoneyWorks for your business or sign up a free demo to see how MoneyWorks works for your business finance.

How to use QuickBooks Sales Receipt as an internal maintenance service note?

Generally, we use QuickBooks Sales Receipt to record Cash Sales transaction or charitable organisation using it as a donation receipt. However, for those who are in rental services (renting out equipment or facilities such as a conference room, studio, etc.) or chartering service (bus, car, boat, etc.) may use Sales Receipt feature to record the part used in serving the equipment or facilities. For example, you may change the worn out seat belt or car seat on the chartered bus. In this case, seat belt and car seat are your service part which you used it internally to maintain your asset.

Create the service parts as an inventory item, so when the item purchased it will debit the inventory asset of the maintenance part and credit the accounts payable or bank account.

Then, use the QuickBooks Sales Receipt (you can rename the form as ‘Service Note’ or something which relevant to your business) to record the part used on the equipment. The customer name on the receipt can be the equipment/asset name or vehicle number, which depending on businesses. Next, use those service part which you have purchased in the detail line with $0.00 selling price.

QuickBooks Sales Receipt

Assuming the cost of the part used is $1,000, then the double entry of the sales receipt will:

Debit Accounts Receivable 0.00
Debit Cost of Good Sold (or your prefered expense account) 1,000

Credit Sales 0.00
Credit Inventory Asset of the maintenance part 1,000

You can print an Inventory Valuation Detail report to check the transaction history of the part. Inventory Valuation Detail report is like a stock card where you can see the in/out of an item.

QuickBooks Inventory Detail Report

Next, print a Sales by Customer Report, which you can customise the report to something like ‘Service Parts Used by Machine’, to find out the items used on each machine (or vehicle).

QuickBooks Sales by Customer Detail

QuickBooks is a simple yet feature-rich accounting system for small businesses.

QuickBooks Desktop 2019 has launched, contact us if you like to upgrade your system.