Direct cost applied and COGS A/c

shankerhrm

Hi,

This is Jaishanker, I have few doubts in cost accounting.

When a purchase of inventory is made, 4 accounts are hit:
1000 Inventory
2050 A/P
2100 Purchases
2150 Direct Cost Applied

When the items are sold, 4 accounts are hit:
1000 Inventory
1050 A/R
1100 Sales
1150 COGS

Case 1).Invoice a purchase order for $10.00 *3 qty for item A, the following happens

Purchases A/c $30 Dr
Accounts Payable A/c $30 Cr

Inventory A/c $30 Dr
Direct Cost Applied A/c $30 Cr

Case 1.1). Now, suppose i need to return 1 qty of item A to the vendor and the vendor is only willing to give you credit for $8.00 per qty. When you post the credit, the following will happen:

Accounts Payable A/c $8 Dr
Purchases A/c $8 Cr

Direct Cost Applied A/c $8Dr
Inventory A/c 8 Cr

In this case we have to post additional two entries for Adjustment

Direct Cost Applied A/c $2Dr
Inventory A/c $2Cr

Case 1.2) Invoice a Sales order 1 qty at $12.00 for item A, the following happens:

Accounts Receivable A/c $12 Dr
Sales A/c $12 Cr

COGS $10 Dr
Inventory $10 Cr

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Please confirm the above entries then give me income statement for the above transaction.
Plz.

Alex_Chow

You should read my blog on this...

http://www.dynamicsnavconsultant.com/20 ... e-cpa-way/

Yashojit_Pandhare

Check for Exact Cost Reversing feature!! You may not have to post the additional adjustment entries manually.