Bill client for merchandise in inventory

USA Discussion in 'Technical Queries' started by osaben, Dec 28, 2016.

  1. osaben

    osaben

    Joined:
    Dec 28, 2016
    Messages:
    2
    Likes Received:
    0
    Inventory on books for$7,000 (7 units at $1,000). Need to sale/invoice client 4 units at $1,050 ($4,200). I understand that the transactions typically would be: 1) debit COGS $4,000 & credit inventory $4,000, 2) debit Sales $4,200 & credit A/R $4,200. The gross profit therefore is $200.


    However, I believe I need the $4,200 to be reflected on my books as an direct expense. So that it can be passed onto the client via an invoice (sales journal posting will debit sales and credit A/R the $4,200) My sales journal is a total direct costs and overhead burden costs.


    How do I record the 4,200 in direct expenses?
     
    osaben, Dec 28, 2016
    #1
    1. Advertisements

  2. osaben

    Radek Výtisk

    Joined:
    Dec 19, 2016
    Messages:
    14
    Likes Received:
    0
    Well, not sure I understand your question fully but one obvious error in your question is that it should say Debit A/R $4,200 and Credit Sales $4,200 (neglecting any VAT and things like that).

    What I don't understand though is why you need some direct expense? You issue an invoice to your customer, saying We bill you $4,200 for this and this. And you book what I wrote above. Plus you book the decrease of inventory just in the way you wrote.

    So you'll have two accounting entries for that one transaction. Or, am I missing something?
     
    Radek Výtisk, Dec 28, 2016
    #2
    1. Advertisements

  3. osaben

    osaben

    Joined:
    Dec 28, 2016
    Messages:
    2
    Likes Received:
    0
    First, Thank you so much for taking the time to review my question and to respond.

    Next, My apologies. You are correct It is a debit to A/R of $4,200 and Credit to Sales $4,200.

    The inventory is being billed to our client via a cost reimbursable contract (sometimes called cost plus contract). In a cost reimbursable agreement) the client is billed the actual costs to perform the work, plus an additional fee.

    We want the client to pay for the "going rate" for the inventory vs. what we may have paid ($1000), since we will then be replenishing our inventory (at the new rate ($1,050/unit). A $4,200 direct material cost would be needed so that the client we can bill the client.

    Since this merchandise inventory and my company is a service provider, I thinking maybe COGS is not necessary. Any thoughts about this? Below is what I am proposing the entries may need to be.

    The item highlighted in yellow is what is assigned as a direct expense to the client and the item shaded in blue is a contra expense that brings the total expense line on the I/S to $4000.

    upload_2016-12-28_15-52-20.png

    Any thoughts or suggestions?
     

    Attached Files:

    osaben, Dec 28, 2016
    #3
  4. osaben

    Radek Výtisk

    Joined:
    Dec 19, 2016
    Messages:
    14
    Likes Received:
    0
    Ok, so if I understand it correctly, what you did is that you booked 4,200 into the Direct material costs and then made some corrective entry of 200 to get to the actual costs, is that so?

    And now, your question is where to put those 200? If so, I would say it should go as a deccrease of the direct material costs as that's what it is by substance.

    Does it answer your question? I feel I'm still missing something here, maybe it's something lost in translation, after all, English is not my first language ;)
     
    Radek Výtisk, Dec 28, 2016
    #4
    1. Advertisements

Want to reply to this thread or ask your own question?

You'll need to choose a username for the site, which only take a couple of moments (here). After that, you can post your question and our members will help you out.
Similar Threads
  1. Jamison
    Replies:
    2
    Views:
    422
    John Milito
    Nov 19, 2003
  2. Tracy
    Replies:
    6
    Views:
    720
    Greg Pasquariello
    Jan 17, 2006
  3. 1099-Lost
    Replies:
    7
    Views:
    12,731
    TObject
    Feb 10, 2006
  4. centigal

    Personal use of merchandise

    centigal, Mar 17, 2007, in forum: Microsoft Accounting
    Replies:
    1
    Views:
    521
    Rick Sparks
    Mar 17, 2007
  5. Brett

    How to enter returned merchandise?

    Brett, Oct 4, 2003, in forum: Microsoft Money
    Replies:
    7
    Views:
    2,558
    nataliemartsiano438@gmail.com
    Nov 27, 2012
  6. caj111
    Replies:
    0
    Views:
    796
    caj111
    Apr 15, 2012
  7. MadonnaLynne

    USA AJE for writing off merchandise inventory

    MadonnaLynne, Mar 8, 2015, in forum: General Accountancy Discussion
    Replies:
    1
    Views:
    599
    Triest123
    Mar 8, 2015
  8. Michael Gorodischer

    USA Inventory Valuation & Merchandise Returns

    Michael Gorodischer, Oct 9, 2015, in forum: General Accountancy Discussion
    Replies:
    0
    Views:
    284
    Michael Gorodischer
    Oct 9, 2015
Loading...