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I work at a precious metals dealer and am not sure how to account for a change in the value of a liability. At my firm, we have two liability accounts that deal specifically with precious metals. One for "Bullion deposits" one for "Leased Bullion". The bullion deposits are the sum of prepaid orders that we haven't fulfilled for bullion. When the overall value of precious metals declines, or possibly the number of orders in general decline, the total dollar value of orders will decline so it is necessary to debit the liability account, but where to credit?
It's a similar story with the Leased Bullion account. Our company takes precious metals from customers and in return gives them a fixed interest rate paid in precious metals. So we add the total number of ounces x the closing price of the metal and book that as our liability. But when the value of metals falls 10%, so does our liability. So again I have to debit the liability account, but where does the credit go?
I don't want to put it into some sort of revenue or expense account because this will cause wild swings in our bottom line that will give a distorted net income figure. Thanks ahead of time for any advice or suggestions. Please let me know if you have any questions about my situation.
It's a similar story with the Leased Bullion account. Our company takes precious metals from customers and in return gives them a fixed interest rate paid in precious metals. So we add the total number of ounces x the closing price of the metal and book that as our liability. But when the value of metals falls 10%, so does our liability. So again I have to debit the liability account, but where does the credit go?
I don't want to put it into some sort of revenue or expense account because this will cause wild swings in our bottom line that will give a distorted net income figure. Thanks ahead of time for any advice or suggestions. Please let me know if you have any questions about my situation.