Some help with homework?

"Gregory L. Hansen" wrote

It's kind of difficult to tell what your intended debits and credits are, so I highlighted them.

I would think an alternative would be to credit a "Purchase Discount" account instead of inventory.

The problem with that is, the inventory didn't change. Taking a credit for early payment, or paying a penalty for late payment is not a function of inventory or sales. Inventory isn't changing because of a financial decision to pay early, or pay late.

See comment below:

Correct. Technically, the purchaser should be CREDITING a Purchase Discounts contra-account.

If there is a penalty being paid due to late payment, that penalty should be DEBITED to a Finance Charges expense account.

This is correct, although not as quoted, for a cash sale in a company using the perpetual inventory system.

Periodic would be something else.

That makes more sense to me. But I still wonder how that relates to just buying identical sets of goods from different suppliers at different prices. I know the local Walgreen's, for instance, has things like notepads shaped like letters in the dollar section that they picked up cheap, but a stationary store would charge a few bucks for. Same product, but bought at different prices, and inventory is recorded at cost, not at market value. It seems like a case could be made that discounts and finance charges are a variation on that theme. But the contra-account still makes more sense to me, both logically and for internal use.

this is boring.

So, why are you here then.

Your inventory items are received in at their landed cost and the same item can vary in landed cost due ro a myriad of factors. What is most important is that you understand what inventory system you are using so you know what your COGS should be.

JC> So, why are you here then.

If everyone would add a rule to delete this idiot, none of his comments would get through.

Ok, so fh is this newsgroups token troll... duly noted.

hotshot speaks sense. you accountants want to turn off the truth, doncha?

Joe Canuck wrote:

When two different "retailers" sell the same or comparable products for different prices, that is simply their way of making money. The one that sells cheaper proably gets volume discounts from their wholesaler/manufacturer and is able to pass that savings along. Completely different from offering a prompt payment discount to clients who pay early. Or penalizing late payments for that matter.

The prompt payment discount is OPTIONAL. Either pay in 10 days and reduce your bill by 2% or take 30 days and pay the full amount. Your choice. And also your choice to pay late, but in that case you must ADD 2% penalty.

Where a "discount" would effect your inventory valuation would be a volume or quantity discount: buy 1 to 3 of an item and you pay $3.00 each, take 4 to 10 and you pay $2.75 each instead, take more than 10 and you pay $2.40 apiece. Completely different than cash or prompt payment....

what is a troll?

this sounds like fun.

Do accountants need to go to a 4 year college? Or is 2 years vocational training at a community college enough to do debits and credits and "strategic" cost allocation. "Strategic", I gather, means to cheat effectively.

On 7 Oct 2005 14:36:12 -0700, in alt.accounting "bird flu shot" wrote in :

While you need to understand bookkeeping to be an accountant, the difference between bookkeeper and accountant comes from the 2 or 3 additional years of advanced training.

true, training is needed.

but is the college training, or an apprenticeship in a vocational bookkeeping shop?

true, you need training.

but why college training? seems that an apprenticeship at the local bookkeeping shop or HR block would teach you more of the relevant vocational skills.

I can't speak for others, but things like tax and audit were not even offered at the community college level at my college. I learned most of my accounting (to include the different types like governmental, not-for-profit, and cost) in my junior and senior years; however, even then, there has been so much more to learn. It is only in graduate school that courses like internal auditing and forensic accounting have been offered in my experience. Others' mileage may vary.

For what it is worth, a GOOD accountant will know HOW to cheat... and then implement controls to prevent it.

GOOD LORD! I cringe when I hear someone even MENTION HR Block in relation to accounting. Let's just put it this way, current law allows anyone to hang a shingle and make money doing taxes... it doesn't mean they know what they are doing, just that they may know more than the average person on how to fill in the forms. HR Block lulls people in with their guaranty of bearing any penalties should your taxes be audited and incorrect. Most people foolishly think that this means an incorrect return done by them won't cost anything. This is untrue as owed taxes and interest is still the responsibility of the taxpayer. This may cause them to be so cautious about raising flags that they miss opportunities to save you money. However, I think the "real deal" is to lure people in to have taxes done by someone who may have very little training and their revenue is sufficient to cover the percentage of audits that result in their having to pay the penalties.

But even more important is that bookkeeping and tax are only PARTS of what accounting is. Accountants with proper training can do so much more and be of so much more value to a company. Just managing cash flow is an important task as is budgeting and inventory control. Making suggestions to management on how to improve operations while reducing expenses can cause an accountant to be considered invaluable.

While new graduates are often less prepared for real world accounting than they thought, the foundation learned only by a good college education has them better prepared to deal with anything that may arise. My predecessor at my company, for example, made a lot of mistakes that I had to mop up because she was not a degreed accountant. Furthermore, she consistently had to call the CPAs we use (primarily for audit and tax) for advice which cost the company a great deal.

My degree required that I know more than how to book a transaction... much more. There was macro and micro economics, statistics, business law, accounting law, personal tax, corporate tax, accounting information systems, auditing, finance, banking, international commerce... just to name a few.