Re: Unique Business Example

["aldg" <aldg@xxxxxxxxxxxx>]

Hi Connie Webb:

> "...invoicing for the core puts money on the books..."

and

> "BOTTOM LINE - Overstating sales until credit is issued for returned > core."


Actually using the accrual basis of accounting, invoicing a customer "does not 
create any money" on the books.  It creates a receivable, which must be paid by 
the customer first to generate any cash for the company.  

Next, my suggestion for handling the cores is to bill the customer for the core 
but instead of recording 'Core" sales, credit a balance sheet liability account 
called something like "Unrecognized Core Billings."

Then when the customer returns the core, you write a journal entry (or run it 
thru the purchase journal; there are various options here) to set the returned 
core up in inventory and relieve the liability account for the contra amount.

As a result, there really isn't any "overstated sales" at all because a sale 
for the core was never recorded using the above procedures.

> "Any innovative suggestions to control business requirement with these
> conditions:"

My suggestions aren't really innovative, just regular accrual basis accounting 
rules and procedures.

If you have any additional questions, please post it thru the Mapics ML.

Regards....

------Your 8/7/01 Original ML Message------

>From: Connie Webb <cwebb@grahamwhite.com>
>Reply-To: MAPICS-L@midrange.com
>Date: Tue, 7 Aug 2001 10:00:20 -0400 

>Any innovative suggestions to control business requirement with these
>conditions:
>
>1. Core (old product) is in inventory waiting for PO to remanufacture.
>2. PO comes in, core is pulled and refurbished.
>3.Customer is invoiced for cost of repairing core and the old core we
>supplied. IF he does not return the old Core from his system he will be
>liable for charge for that.
>
>Problem is that invoicing for the core puts money on the books not likely to
>stay there. Also, must relieve inventory of core until replacement comes in.
>
>
>BOTTOM LINE - Overstating sales until credit is issued for returned core.
>
------End of Your Original ML Message------


--
Above message before copy enclosure (if any) was sent by:

Al Gershen
Grants Pass, OR 97526 
aldg@mail.rvi.net
& ICQ # 12342782

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