USA Non conforming inventory

[Derek Jones]

I have non-conforming inventory sitting in our G/L account, the problem is this material was sold in prior periods as scrap at a lower cost. What entries need to be made to clean this account up and also do I need to use a variance account to show the loss of income through selling the material as scrap?

 

[DTA93433]

You could do it in 2 entries if you wish: (1) debit cost of sales and credit inventory to remove the cost of inventory from the books and then (2) the sale - debit cash and/or receivables and credit sales revenue. That's how I would do it. But book both entries in the period of sale so you match the revenue with the expense.