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 |
|
|
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 andAccessories Inventory |
|
OtherInventory |
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.