The calculations can be done weekly, monthly, quarterly, or yearly depending on the volume of your transactions however, all transactions must be completed by June 30. The time period for making these calculations needs to be the same. Sales – Cost of Goods Sold = Gross Profit Profit is the difference between sales and cost and is calculated as follows: Cash Sales: Account NumberĪccounts Receivable Sales: Account NumberĬalculating and Recording the Cost of Goods SoldĬost of goods sold is the value (cost) of what you have sold and is calculated as follows:īeginning Inventory + Purchases – Ending Inventory = Cost of Goods Sold When selling inventory and recording an accounts receivable, use an accounts receivable object code. When selling inventory to a non-Cornell entity or individual for cash/check, record it on your operating account with a credit (C) to sales tax and external income and debit (D) to cash. This will show income (credit - C) to the operating account and an expense (debit - D) to the customer’s account that is receiving the inventory. Process the transaction on an Internal Billing (IB) e-doc to credit interdepartmental income on your operating account and debit an interdepartmental expense in the purchasing department’s account. Transfer the inventory cost of goods sold to the operating account using a cost of goods sold transaction. Record sales in the sales operating account with the appropriate sales object code. When goods are sold, properly record the transactions and ensure that the correct items are billed and shipped to customers. Top Recording Transactions for Goods Sold Inventory purchases are recorded as a charge (debit - D) in the sales operating account on an Inventory object code. Reconcile the Inventory object code for products received to invoices received. When goods are received, the packing/receiving slip should match the invoice and materials you received. Goods for resale are purchased through the purchase order process (follow purchasing procedures). Top Purchasing and Receiving Goods for Resale Separate and note obsolete or damaged products and record waste or damaged products on a waste sheet. Label and store inventory in a manner that allows you to easily access items and determine the quantity on-hand. High-dollar items should be secured with locks separate from the common storage area. Storage areas should be locked when operations are closed. Ensure that all employees responsible for inventory control and accounting entries are knowledgeable about the products and items inventoried. Limit access to inventory supply and implement procedures for receiving and shipping. Top Establishing Physical Inventory Controls A cost-of-goods-sold transaction is used to transfer the cost of goods sold to the operating account. Inventory purchases are recorded on the operating account with an Inventory object code, and sales are recorded on the operating account with the appropriate sales object code. Generally, units should have an inventory accounting system that tracks purchases and sales of the units’ inventory and allows units to calculate cost of goods sold, which must be transferred to the operating account. Top Establishing an Inventory Tracking System Note: See the object code list below for a detailed list of object codes (with their names and descriptions) used to record and adjust your inventory and cost of goods sold. The Inventory object code (asset) is used to record inventory value, reconcile inventory value after a physical inventory is performed, and transfer cost of goods sold to the inventory operating account. The sales operating account is used to record sales of inventory to customers, reconcile inventory value after performing a physical inventory, and record other expenses related to the sale and operation of the inventory. Adjust the General Ledger Inventory BalanceĮstablishing a Sales Operating Account (Current Fund, GNDEPT).A physical inventory must be done annually. Departments receiving revenue (internal and/or external) for selling products to customers are required to record inventory. Inventory can be any physical property, merchandise, or other sales items that are held for resale, to be sold at a future date. Inventory is an asset and it is recorded on the university’s balance sheet. If you have questions about inventories, contact Accounting.
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