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Accruing costs until a vehicle is sold
| Steps | Notes |
|---|---|
| Step 1. Create a New Inventory Account | For Example – 77xx/000 – Inventory – Cost Types |
| Step 2: Update Cost Type Default Ledgers | Change the default ledger for all Cost Types to the newly created Inventory Account, with the exception of the After Sales Account (e.g.: Expense 4700/000). This will prevent Cost Types (with the exception of After Sales) from appearing on the Income Statement when transferred to the ledger. |
| Step 3: Generate Month-End Stock Reports | At month-end, draw the following stock reports: — Full Profit Report (VAT Excl.) — Stock Cost by Type by Sold Date |
| Step 4: Process the Monthly Journal | Balance the ex-VAT amount from the Stock Cost by Type by Sold Date report to the Full Profit Report. This is a critical step to ensure accuracy, as it reconciles the first and second gross costs. If the reports balance, general journals are processed for each section of the Stock Cost by Type by Sold Date report. — Credit the 77xx/000 – Inventory account. — Debit the original Cost Type ledger (e.g.: 2060/000 Recon Costs or 2080/000 Lic & Reg). This process ensures that costs are correctly accrued on the balance sheet and moved to the income statement only at the point of sale. |
Want to check if your data is right?
- Open the “stock cost by type by sold date” report for the period you are in.
- The ex-vat total should balance back to the recon 1st gross and 2nd gross cost column totals on your Full profit vat exclusive report.
What if doesn’t
- Then you need to do a recon.
- You will need to recon the two reports mention above to find anomalies/discrepancies.
- Export the two reports to excel and then sort by stock code.
- On your stock by type add all the costs associated with a stock code and that should balance back to the stock code on your full profit report.
I found a discrepancy. Now What?
- It could be an aftersales cost type that has been allocated to the 770x/000 ledger account in cost type.