Some of the inventory is left over but not much.. I guess my question is could I account for the inventory as a parts expense instead of having to use a inventory account and a cost of goods sold account, the businesss is a Lock smith company that only buys goods when needed but the quantity that is bought sometimes comes with more than that is needed.. would writing this off as parts expense comply with GAPP
It is a really a matter of judgment..
According to GAAP, there is constraint called Materiality, which concern an item’s (or Items) impact on a company’s overall financial operations. An item is material if its inclusion or omission would influence or change the judgment of a reasonable person.
To apply the constraints to your case, you have to judge for yourself. is the amount of the inventory can change the financial operations of the company or not.
if the amount of the inventory is relatively small that will not make any big difference in your monthly or yearly financial statements, like decreasing your assets dramatically, then do it. if not then you have to use inventory account and use methods of cost of good sold and the rest of it…
Staffing Firm - Liberty Personnel Services, Inc.
March 1st, 2010 at 3:15 am
It is a really a matter of judgment..
According to GAAP, there is constraint called Materiality, which concern an item’s (or Items) impact on a company’s overall financial operations. An item is material if its inclusion or omission would influence or change the judgment of a reasonable person.
To apply the constraints to your case, you have to judge for yourself. is the amount of the inventory can change the financial operations of the company or not.
if the amount of the inventory is relatively small that will not make any big difference in your monthly or yearly financial statements, like decreasing your assets dramatically, then do it. if not then you have to use inventory account and use methods of cost of good sold and the rest of it…
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Accounting Student