Have you tried all of this in a clean test company?
On Thu, 15 Jul 2010, Jeff Kaminsky wrote:
Paul,
You bring up a lot of interesting thoughts. The invoice to our customer, does
not use assemblies, we simply invoice each part on its own on the invoice. So
I checked each part in our system for any differences in the way we set them
up, and as far as I can tell, they all seem identical, other than costs and
name of the part. I need to know if this is an isolated event, where, not
every part on my invoice is being picked up in COGS, or if this is
potentially a universal problem.
Should I be using assemblies? Most every server we well to our customers is
very customized for them. We don't have a standard server that we sell.
Jeff
On 7/15/2010 10:56 AM, Paul Tammes wrote:
AFAIK it is FIFO indeed, documented that way as well iirc. Assemblies are a
whole other ballgame again i seem to recall.
Unless you work with serial numbers for all parts and scan the parts per
sale, I do not see any simple way around the FIFO method.
Unless you need other figures, it is a solid and approved method of stock
valuation.So no real problem apart from maybe a like or dislike of this
specific accounting method.
At one point in time, you bought a hard disk for price x1. Now you sell a
hard drive, COGS x1 is taken into account.
Suppose you bought a total of three hard disks, next time, COGS x2 will be
used. Leaving the x3 still in stock at the right x3 COGS.
You did not CHECK the COGS before? Just changed the values to what seems
right?
Manually adjusting the level of inventory value means either taking a
profit or a loss on that specific balance day. Say you re-valued X2 to X2
minus 200.
Two thing happen:
1) ALTHOUGH NO SALE WAS MADE, you book a profit / loss.
2) since nothing was actually sold, and no new disk of type x1 was bought,
cogs x1 has not changed. So cogs of X1 will still be used in any future
sale.
Now when you really DO sell a server or two, the booked prices are off.
Well, seeing this method of valuation it would be very strange if they
where right to be honest.
*Note *I think the ´last purchase price´ field might be manually updated
and maybe that would fix the drive to use the COGS you would like to see.
But imho there IS nothing to be fixed, as the accounting method used and
the COGS you would like to see is not correct.
Just because I am interested in the total picture, the two servers, where
they put together as an assembly before the sale, or did you enter all
parts used on the invoice?
That again might be of impact.
If no amount was used for the memory, it may indeed be set up wrong. Eg. as
as a non-tracking item, or as a non-stock item.
Compare to the items that did register a COGS, although it may not be the
one you would like to see, in order to find out the reason it did not pick
up a cogs..
HtH,
Paul
2010/7/15 Jeff Kaminsky <[email protected] <mailto:[email protected]>>
Since 2002, I have been adjusting the dollar value of our cost of
goods sold to reduce inventory to what we believe the correct
inventory level should be. Every time, I'm increasing COGS and
decreasing Inventory. Recently since we've become a larger company
and face higher levels of scrutiny I have become more interested
in this particular phenomenon. So I ran a test case, we sold 2
expensive servers to a customer, and I immediately went into COGS
and Inventory to see if the correct figures were adjusted.
Quantities seem correct
Dollar amounts are not correct.
We sold
2 chassis, Inventory was decremented by 2, but COGS shows only the
cost of one of them
12 hard drives, Inventory was decremented by 12, but COGS does not
show the actual costs of the hard drives we bought, but took costs
based on obviously a FIFO (first in, first out basis),
16 pieces of memory, Inventory was correct, but... nothing shows
in COGS!!
There is more, but, the recorded costs for this sale were 9,613.50
and according to our purchase receipts it actually cost us
12,486.00. So I was wondering if anyone has seen this before, did
we set up some parts wrong, or use an odd character somewhere that
would make COGS react in this way?
Jeff
--
Jeff Kaminsky
Sr. Accountant
IX Systems
408-943-4100 ext 122
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