Bookkeeping for Inventory Q&A Nov 7 2012

Q&A for today's webinar
Q: Does property include stocks/shares
A: Property can include stocks/shares/investment portfolios though I prefer to use Quicken which will be the topic of four sessions in January 2013. Yes, you can use QuickBooks Inventory Parts to track average cost of shares. Esther Friedberg Karp interviewed me for an article on that topic. I'll attach the article.
Q: Other types of inventory - would that include holding corps that own land and building rented to operating corps?
A: Yes
Q: What would cause a decline in value?
A: Anything that drops the market price below the cost. Normally we record inventory at the lower of cost or market, though with the new accounting methods, it may be that sometimes inventory is marked up, you'd have to ask an accountant who specializes in that field to see if that was ever a possibility. For example, portfolio investments may be marked up by what we call 'mark to market' to record the investment at fair market value when it's above cost, and the difference, net of unrealized tax liability would be recorded under what is called 'Comprehensive Income'. I'd have to look up in the CICA Handbook to check if comprehensive income which is the unrealized gain/loss net of tax on the increase or decrease in the portfolio, would be included in the income statement, or whether it's an after income statement adjustment to retained earnings.
Q: How can we generate the COGS report in QuickBooks?
A: Filter the income statement to include only the COGS accounts
Q: Another example of something that might be marked up would be jewels where a jeweller invests in stones
A: Yes, again, it would be necessary to determine if that type of asset would be marked up to market.
Q: Are you doing all these entries through invoices or journal entries?
A: The sales are via Invoice, purchases via Bill, and adjustments to record the Open Bal, Ending Bal and adjustment to purchases are recorded on journal entries. Notice that the journal entries are recorded completely within the COGS accounts, there's no effect to the Inventory Accounts. The entry is to increase Open Bal, Decrease End Bal, and adjust Purchases for the difference. The Decline in Value after what is available adjusts the amount available.
Q: Why didn't you use Class instead of sub-accounts for separate locations on the Balance Sheet?
A: I could have used Class now that the Balance Sheet can be reported by Class, though I probably still would have used sub-accounts as those are easier to keep separate
Q: You can only set up Inventory Assembly in Premier. If my client doesn't have Premier, we have to settle for Inventory Parts.
A: Yes, you could manually assemble by removing from the individual parts and re-allocating the costs using the Bill as a mechanism to effect that. I can show you that next week, remind me as I actually use that technique for other reasons, but it will work for assembly as well.
Q: Would you create a separate account for each Item?
A: Absolutely not, you want very few accounts, many Items. When we get to the Item reporting you'll see why.
Q: Will we have access to this webinar later on to go through it again?
A: If you are a member, it's free to attend, but necessary to purchase if you want to own the recording. If you wait until the end of week 3 there's a 10% off on all three, or I suppose if someone wanted to purchase all three now, I could ship the first one now and the other two as they were created. I'll set up the sales buttons on my shopping cart later today.
Q: Was it just for comparison that you are reporting both periodic and perpetual inventory or is this part of the new GAAP for reporting?
A: I am splitting apart the various types of inventory to show how each will reconcile back to the change on the balance sheet for that type of Asset. In other words, each asset has an opening balance, there are purchases, less the ending balance to arrive at the COGS expense. If you keep them separate, both on the income statement and the balance sheet, it makes it easier to do your year end reporting.
Q: Is it your recommendation that we setup a separate chart of account for Perpetual (Inventory Parts) and Periodic (non Inventory Parts) ?
A: Yes, I would do that in order to keep it all in balance. In fact, if you have all of the types, I would have income and asset accounts for each type
Q: Can we design similar income statement for monthly COGS?
A: Absolutely just change the columns total by to monthly from annual and same for the balance sheet section
Q: Why do you have to check mark "part of an assembly" to get the chance to name expense and revenue accounts?
A: If you don't, everything you post will post to revenue because that's the only box that's open. If you open by check marking, every single Item can be used to both buy and sell and will point at the right side of the equation, in other words, your revenues will point at the Income accounts, and your COGS or expenses will point at the right expense type of account. IN the third session I'll show you how to ensure that your Items are pointing at the right accounts, so you aren't understating either of revenue or expenses as that is really embarrassing!
Comment: I'm looking forward to the next two sessions as well. Hopefully we have pre-jinxed them, and no more C=224 error messages or brain meltdowns where I put in the wrong number! Thanks so much to those of you who helped point me to the error quickly! We all need more than two eyes in this business.