243 Tires
Assets
Inventories
Synopsis
Account 243 is established to record the inventory value of Tires on hand.
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Debits |
Credits |
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Example 1
Record the $7,980 purchase of tires for inventory.
Journal: Cash Disbursements and Purchase
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Entry: |
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Debit |
Credit |
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Account 243 |
Inventory – Tires |
$7,980 |
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Account 300 |
Accounts Payable – Trade Creditors |
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$7,980 |
Example 2
Record the $280 adjustment needed to agree book balance to physical count (physical count is less than book balance).
Journal: General Journal
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Entry: |
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Debit |
Credit |
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Account 690 |
Cost of Sales – Tires |
$280 |
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Account 243 |
Inventory – Tires |
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$280 |
Example 3
Record customer repair order for sale of mechanical labor and tires of $442. The customer paid labor is $85. The tire sale is $340 with sales tax of $17. The cost of labor is $25 and the cost of sales for tires is $285.
Journal: Service Sales - Cash
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Entry: |
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Debit |
Credit |
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Account 225 |
Cash Sales |
$442 |
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Account 660A |
Cost of Sales – Customer Labor – Cars & Light Duty Trucks |
$25 |
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Account 690 |
Cost of Sales – Tires |
$285 |
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Account 243 |
Inventory – Tires |
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$285 |
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Account 247A |
Inventory – Work in Process – Mechanical |
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$25 |
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Account 324 |
Sales Taxes Payable |
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$17 |
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Account 460A |
Sales – Customer Labor – Cars & Light Duty Trucks |
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$85 |
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Account 490 |
Sales – Tires |
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$340 |
Example 4
Record a $179 credit memo issued to a retail customer for tires returned. The credit to tire sale is $170 and credit to sales tax is $9. The inventory value and cost of sales-tires is $142.
Journal: Parts Sales
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Entry: |
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Debit |
Credit |
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Account 490 |
Sales – Tires |
$170 |
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Account 324 |
Sales Taxes Payable |
$9 |
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Account 243 |
Inventory – Tires |
$142 |
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Account 220B |
Accounts Receivable – Customer – Service and Parts |
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$179 |
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Account 690 |
Cost of Sales – Tires |
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$142 |
Comments
A debit balance represents the inventory value of tires.
Note:
Physical inventories should be taken at each month end of the following:
· Tires
· Gas, Oil and Grease
· Paint and Body Shop Materials
These inventories should be priced at the lower of cost or market values. Any differences between book and physical count values should be adjusted through the following accounts, as applicable:
· Acct 690, Cost of Sales - Tires
· Acct 691, Cost of Sales - Gas, Oil and Grease
· Acct 679, Cost of Sales - Paint and Body Shop Materials
A physical inventory of other merchandise should be taken at least once each year. It should be priced at the lower of cost or market value. Any difference between book and physical count values should be adjusted through Acct 692, Cost of Sales - Miscellaneous.
Transactions, which are related, should be recorded in separate sub-accounts. Sub-accounts serve to keep records organized for future analysis and auditing. The sub-accounts in these examples are designated by a letter following the account number (suffix). Please refer to your DSP's instructions for establishing sub-accounts.
LAST-IN, FIRST-OUT (LIFO) INVENTORY VALUATION
Dealers who have elected to utilize the LIFO method for reporting other inventories should establish separate general ledger accounts captioned LIFO Reserve for each other inventory account affected by LIFO.
For example, the entries to establish the initial LIFO adjustment should be handled as follows:
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Parts andAccessories Inventory |
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OtherInventory |
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Actual inventory |
$170,000 |
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$50,000 |
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LIFO inventory |
$135,000 |
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$42,000 |
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LIFO adjustment |
$35,000 |
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$8,000 |
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DEBIT |
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CREDIT |
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ENTRY: Acct. 952 LIFO Adjustment |
$43,000 |
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Acct. 242L, Inventory-Parts & Accessories-LIFO Reserve |
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$35,000 |
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Acct. 252L, Inventory-Other-LIFO Reserve |
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$8,000 |
Subsequent adjustments to each LIFO reserve account should be offset to Account 952, LIFO Adjustment. LIFO adjustments must be recorded and displayed on Page 7, on the operating report.
The Total LIFO Reserve, Line 36, Page 7, will be transferred & displayed on Page 1, Line 35.