outdated inventory
by Nell
(Surrey, BC Canada)
My husband sells cookies to grocery stores. The product (cookies) are bought by us from the manufacturer and then sold to the grocery stores.
If the product becomes damaged or outdated he gives the store a credit. In my books this is entered as AR cr and Sales dr. I am wondering if I can expense the our cost of returned product because it can not be resold. If I can then is the entry Inventory cr and damaged product dr?
thank you
Nell
Hi Nell,
I believe you can expense the outdated goods by debiting a Damaged Products expense account.
Or, you can also debit Returns and Allowances as a subaccount of Sales.
The end result should be the same either way.
Thank you for your question.
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Inventory
by Susan
(Spokane)
How is an inventory reduction booked. If you had 4 items included in your inventory and when you do a physical inventory they are not there, how is the loss booked?
Thank you for your question.
I believe you can book the change in inventory to an Inventory Adjustments Account which would be a subcategory of Cost of Goods Sold and will show on your current Profit and Loss Statement.
The 4 items would originally be shown as a debit in the Inventory Account (Asset), so when you post the loss, you would credit the Inventory Account and Debit the Inventory Adjustments Account (COGS).
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