Inventory valuation


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hi, I want to know the effect on the closing balance of inventory after selling items for below the cost price ( ie. promotions which ran through out the year), For example selling a sim card below the cost price so as to get customers to buy recharge cards/top up cards. If you could refer me to relevant US GAAP standards that would be helpful.
Thanks.
 
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Counterofbeans

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Well, I can point you to ASC 330 in general, but I need to understand this better...

When you say, "selling items for below the cost price," that sounds like a lower of cost or market issue, which is ASC 330-10-20. If this wasn't considered and you already sold them, you might simply just have a cutoff issue, whereby losses incurred in the period of sale should have been recorded in the G/L in a previous period.

I don't even know how to answer, "the effect on the closing balance of inventory." If the items are sold, the corresponding cost needs to be removed from inventory. If you have any items that remain where you expect to sell below "market" (as defined above), you have an issue.
 
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Retail business inventory management

Hi!
I am setting up inventory management system for a retail business. My question do I need to setup separate account for each and every inventory item or can I group some of them under one account? For instance, maintaining an inventory of 10 cents candy bars - is it justified? there are hundreds of different type of products in retail store. if we maintain separate account for each and every one of them. it will become very complex. What is the solution to this problem? Pls help
Thanks
 

Samir

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This is why you have POS systems that do inventory as well. That little scanner gun isn't just to make the price lookup easier...;)
 
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Counterofbeans

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Hi!
I am setting up inventory management system for a retail business. My question do I need to setup separate account for each and every inventory item or can I group some of them under one account? For instance, maintaining an inventory of 10 cents candy bars - is it justified? there are hundreds of different type of products in retail store. if we maintain separate account for each and every one of them. it will become very complex. What is the solution to this problem? Pls help
Thanks
Yes. You need to set up a separate G/L account for each and every inventory item, but only if you are truly masochistic...

The correct accounting treatment depends on what inventory system you plan on using. Either it's periodic or a perpetual inventory system. I'd recommend a perpetual inventory system, but a periodic is fine, given some strong internal controls...

In neither case, however, would I ever, ever set up a separate GL account for 100s of inventory items...that's pretty pointless.
 
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