I'm a techie, not an accounting guy. However, I'm studying accounting and
finance on the side for investing purposes and growth. I'm currently readi
ng a very basic book dealing with financial statements. My question is abo
ut inventory. The book states if inventory increases then cash has decreas
ed and if inventory decreases cash has increased.
However, wouldn't this depend on whether you actually paid cash or received
cash for the inventory?
Here's how I see it. Maybe you purchased the inventory on credit? Maybe y
ou sold the inventory on credit increasing account receivable? I both case
s, no cash has actually went into or out of the business.
Thanks in advance for any assistance.
On Fri, 15 Nov 2013 08:33:06 -0800 (PST), firstname.lastname@example.org wrote:
Correct. The cash account is not touched until the money actually changes
hands. In the meantime, you would journalize the sales, inventory, cost of
goods sold, a/p, and a/r accounts depending on the transactions. Imagine
what would happen if a bookkeeper for a small company recorded all sales
immediately into the cash (various bank sub-accounts) account and tried to
cut checks to pay bills based on those numbers. I ran into this problem
with a restaurant that immediately recognized credit card sales as cash and
didn't understand why their checks kept bouncing.
In a related matter, if you withdrew $100 from an ATM, would you consider
it an expense or just a transfer of assets until you used the cash?
If you can keep your head when all about you are losing theirs, it's just
possible you haven't grasped the situation. -- Jean Kerr
On Saturday, November 16, 2013 10:32:18 AM UTC-5, Rocinante wrote:
and finance on the side for investing purposes and growth. I'm currently r
eading a very basic book dealing with financial statements. My question is
about inventory. The book states if inventory increases then cash has dec
reased and if inventory decreases cash has increased.
ived cash for the inventory?
be you sold the inventory on credit increasing account receivable? I both
cases, no cash has actually went into or out of the business.
On the related matter, I'd consider it a transfer of cash until I used it.
Is that correct thinking?
On Tue, 19 Nov 2013 20:57:51 -0800 (PST), John wrote:
Yes, of course. You could have it in your pocket for weeks before you use
it. Personally, I don't keep track of where it specifically goes as I spend
it unless I make a major cash purchase. I have a Misc. Cash account in
Quicken, debit it when I withdraw cash, and count what is left in my wallet
each week and credit the difference.
"Attention to Detail: noticing that the clock on one of your systems is
using Aleutian time, and changing all the others to match."
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