Not to call your accountant out, but WOW!
If the transfer of ownership of the fixed asset
occurred when the setup services were performed, there
is only ONE economic event that is occurring and
should be recorded as such:
Dr Fixed Assets - $1,000,000
Dr Shipping Expense - $50,000
Dr Professional Services expense (or something
similar) - $150,000
Cr Accounts Payable $1,200,000
However, if the transfer of ownership of the fixed
asset occurred when the item was shipped, and then at
a later date the item was setup, then there are TWO
economic events.
Dr Fixed Assets - $1,000,000
Dr Shipping Expense - $50,000
Cr Accounts Payable - $1,050,000
Dr Professional Services expense (or something
similar) - $150,000
Cr Accounts Payable - $150,000
An invoice is a request for payment. Stop making it
out to be something that it is not. A company's
account of their assets and liabilities has changed
regardless of whether a request for payment has been
made. Their assets and liabilities do not change
because a request has been made (or an even more
absurd assertion, that the request has been received).
This is why we have separate entities for invoices
and gL. Please use the correct entities.
** Disclaimer: I am not an accountant and should not
be construed as specific accounting advice. Even
though I do hold an MBA, please do your own diligence.
--- Adrian Crum <[EMAIL PROTECTED]> wrote:
> Our accountant just reviewed this email and he said
> it looks good to him.
>
>
> Si Chen wrote:
> > David,
> >
> > Invoices are definitely economic events, I agree.
> >
> > Here's the rationale for the "Uninvoiced Fixed
> Asset Receipt," and it
> > is similar to the reasonable for the "Uninvoiced
> Item Receipt": it is
> > to decouple of the value of the receipt or
> creation of a fixed asset
> > from accounts payable invoices. To wit, you can
> have these scenarios
> > which this account would solve better:
> >
> > 1. You buy a fixed asset worth $1 million, but
> the vendor's invoice
> > also includes $50,000 of shipping and $150,000 for
> set up. So you can
> > do this:
> >
> > DR Fixed Asset $1 million
> > CR Uninvoiced Fixed Asset Receipt $1 million
> >
> > DR Uninvoiced Fixed Asset Receipt $1 million
> > DR Shipping $50,000
> > DR Setup $150,000
> > CR Accounts Payable $1.2 million
> >
> > 2. You manufactured a fixed asset worth $1
> million in house, so you
> > can do this
> >
> > DR Fixed Asset $1 million
> > CR Uninvoiced Fixed Asset Receipt $1 million
> >
> > DR Uninvoiced Fixed Asset Receipt $1 million
> > CR WIP Inventory, Labor, expenses, etc. $1
> million
> >
> > You can imagine there are some other scenarios
> where this would apply.
> >
> > On Dec 3, 2006, at 1:00 AM, David E Jones wrote:
> >
> >>
> >> Hmmm... invoice are _definitely_ "economic
> events", or artifacts that
> >> have a direct financial impact on a company and
> therefore when
> >> finalized cause GL entries to be posted. That's
> the normal way of
> >> doing things. An order is received and there is
> generally no GL entry
> >> at that point. There are GL entries needed during
> fulfillment
> >> (inventory issuance), invoicing, receiving
> payments, etc.
> >>
> >> Maybe this isn't what you meant though. I agree
> that Si's use of a
> >> "Uninvoiced Fixed Asset Receipt" account seems a
> little funny. When a
> >> Fixed Asset is received you would get an invoice
> along with it from
> >> the vendor so it would be an unpaid invoice, or
> payables entry.
> >>
> >> -David
> >>
> >>
> >> On Dec 1, 2006, at 5:21 PM, Chris Howe wrote:
> >>
> >>> I know you want to want to link all of these
> into
> >>> automated actionable steps that make sense to
> your
> >>> business processes but you must remember:
> >>>
> >>> General Ledger entries are ONLY for economic
> events.
> >>>
> >>> Receipt of an invoice is NOT an economic event.
> If
> >>> you receive a fixed asset you:
> >>>
> >>> Debit: Fixed Asset
> >>> Credit: Accounts Payable
> >>>
> >>> If you want to create a relationship between the
> fixed
> >>> asset and an invoice, great. If you want to
> create a
> >>> relationship between the invoice and a vendor's
> >>> account, great. If you want to create a
> relationship
> >>> between a general ledger entry and an invoice or
> a
> >>> fixed asset, great. But under no circumstance
> should
> >>> you record a non economic event in the general
> ledger.
> >>>
> >>>
> >>>
> >>> --- Si Chen <[EMAIL PROTECTED]>
> wrote:
> >>>
> >>>> David,
> >>>>
> >>>> I think what should happen is this:
> >>>>
> >>>> When any fixed asset is created, if we know the
> >>>> ownerPartyId, then we
> >>>> can create:
> >>>>
> >>>> Debit Fixed Asset (or a specific FixedAsset GL
> >>>> account)
> >>>> Credit Uninvoiced Fixed Asset Receipt
> >>>>
> >>>> Then, when you have a purchase invoice with a
> fixed
> >>>> asset item
> >>>> created, you can do this:
> >>>>
> >>>> Debit Uninvoiced Fixed Asset Receipt
> >>>> Credit a Payable of some kind--Accounts
> >>>> Payable? I'm not sure -
> >>>> often fixed assets are bought with loans.
> >>>>
> >>>> Then we'd have to think about doing the
> depreciation
> >>>> calculations,
> >>>> that's what I think could be complicated.
> >>>>
> >>>> Best Regards,
> >>>>
> >>>> Si
> >>>> [EMAIL PROTECTED]
> >>>>
> >>>>
> >>>>
> >>>>
> >>>
> >
> > Best Regards,
> >
> > Si
> > [EMAIL PROTECTED]
> >
> >
> >
> >
>
