245 Paint and Body Shop Materials

Assets

Inventories

Synopsis

Account 245 is established to record the inventory value of Paint and Body Shop Materials on hand.

Debits

Credits

  1. The Cost of paint and body shop materials purchased

  2. The Adjustment for the difference between book and physical count values

 

  1. The Inventory value of paint and body shop materials sold

  2. The Adjustment for the difference between book and physical count values

Example 1

Record the $1,860 purchase of paint for body shop.

Journal: Purchase

Entry:

 

Debit

Credit

Account 245

Inventory – Paint & Body Shop Materials

$1,860

 

Account 300

Accounts Payable – Trade Creditors

 

$1,860

Example 2

Record a customer cash sale of $3,740 for body shop labor, parts and materials. The body labor sale is $740 and the paint labor sale is $595.  The parts sale is $1,975. The cost of paint & body shop materials is $315 and sales tax is $115. The cost of labor sales is $795 with $350 due for paint labor and $445 for body shop labor. The parts cost is $1380. The cost of body shop materials is $235.

Journal: Body Shop Sales

Entry:

 

Debit

Credit

Account 225

Cash Sales

$3,740

 

Account 670

Cost of Sales – Customer Paint Labor – Cars & Trucks

$350

 

Account 671

Cost of Sales – Customer Body Labor – Cars & Trucks

$445

 

Account 677

Cost of Sales – Parts – Body Customer Repair Orders – Cars & Trucks

$1,380

 

Account 679

Cost of Sales – Paint & Body Shop Materials

$235

 

Account 470

Sales – Customer Paint Labor – Cars & Trucks

 

$595

Account 471

Sales – Customer Body Labor – Cars & Trucks

 

$740

Account 477

Sales – Parts – Body Customer Repair Orders – Cars & Trucks

 

$1,975

Account 479

Sales – Paint & Body Shop Materials

 

$315

Account 242

Inventory – Parts & Accessories

 

$1,380

Account 245

Inventory – Paint & Body Shop Materials

 

$235

Account 247B

Inventory – Work in Process – Body Shop

 

$795

Account 324

Sales Taxes – Payable

 

$115

Example 3

Record the $350 adjustment for difference in the book value of the Paint & Body Shop Materials inventory versus the physical inventory value at month-end.

Journal: General Journal

Entry:

 

Debit

Credit

Account 679

Cost of Sales – Paint & Body Shop Materials

$350

 

Account 245

Inventory – Paint & Body Shop Materials

 

$350

Comments

A debit balance represents the inventory value of paint and body shop materials, including trim materials.

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:

 

Parts and

Accessories

Inventory

 

Other

Inventory

Actual inventory

$170,000

 

$50,000

LIFO inventory

$135,000

 

$42,000

LIFO adjustment

$35,000

 

$8,000

 

 

 

 

 

DEBIT

 

CREDIT

ENTRY: Acct. 952 LIFO Adjustment

$43,000

 

 

Acct. 242L, Inventory-Parts & Accessories-LIFO Reserve

 

 

$35,000

Acct. 252L, Inventory-Other-LIFO Reserve

 

 

$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.