After taking a physical count, Company XYZ finds that it has the following:
Product Units Value
disk drive 4 800.00
printer 8 2800.00
spreadsheet 20 2000.00
pac man 100 2000.00
Set up GL accounts
For the purpose of this example, assume the following general ledger accounts have been set up:
Debit Account Description
yes 140-001 Inventory-hardware
yes 140-002 Inventory-software
yes 600-001 Cost of Goods Sold-hardware
yes 600-002 Cost of Goods Sold-software
no 500-001 Sales-hardware
no 500-002 Sales-software
Notice how hardware and software products have been separated. The separation is not required, but doing so provides more detailed information if desired.
When the general ledger balances are being set up, nothing is posted to the cost of goods sold or sales accounts. What you see is a debit amount posted to the inventory accounts. In this example, $3,600.00 is posted to account 140-001 and $4,000.00 is posted to account 140-002.
Enter Inventory Products
Each inventory product must be entered on the Enter Inventory Products screen. This screen is accessed from the Select, Inventory Menu by selecting Inventory Products.
Notice that the Price field was left blank. You can either enter the price directly on this screen, or you can run the Reprice Inventory using Margins process after the inventory adjustments have been made to calculate the selling price based on margin percentage. The Unit Cost field is also calculated by the system when the repricing process is run. The Qty on Hand and Value fields are updated when the inventory adjustments are made.
When all of the inventory items have been entered, the current balances can be entered. The inventory adjustment screen is accessed from the Data Entry, Inventory menu by selecting Inventory Adjustments. After the screen is displayed, a new adjustment can be entered by pressing the ADD <F6> button. This positions the cursor on the first field, Entry Id, and you can enter the adjustment. It is suggested that the comment indicate that the adjustment is being made to enter the beginning balances for the inventory products. The following is a sample of how data might be entered for the hardware inventory controlling account, 140-001.
When the information appears correct, press the STORE <F5> button to record this information and display the detail screen. At this point, the inventory unit counts and balances can be entered. The following screen shows one way these balances could be entered:
Each inventory item is debited for its beginning amount and unit balances. The code for inventory, in, is entered in the Ledger field. The product code is typed in the Account field. The inventory account in the General Ledger is credited for the total inventory amount. Each line must be stored individually, so press the STORE <F5> button after each line of information is entered. When all the lines have been entered, press the NEXT <F7> button to redisplay the first screen.
The adjustment transaction for the software inventory account, 140-002 is shown below:
After you have entered beginning balances for all the inventory products, run the reprice process, Reprice Inventory Using Margins on the Inventory menu, to automatically price each inventory product based on the margin entered.
The Inventory Control System is now set up and can be referenced by other parts of the C/Books accounting system.