481 Parts - Internal

Sales

Fixed Operations

Sales Synopsis

Account 481 is established to record the sales of Parts sold on Internal Repair Orders for work performed for other departments

Debits

Credits

 

  1. Internal selling price of Parts sold on Internal Repair Orders

  2. Internal selling price of Parts for installation on New Vehicles

  3. Internal selling price of Parts for reconditioning Used Vehicles

  4. Internal selling price of Parts for dealer Policy work

  5. Internal selling price of Parts for repair and maintenance of company-owned vehicles

  6. Internal selling price of Parts for repair of customers’ vehicles damaged due to employee negligence, for which an employee is not charged

 

Example 1

Record a $400 internal repair order for reconditioning to a used truck that is in inventory.  The labor sale is $300 and the part sale is $100.  The cost of labor is $90 and the parts cost is $80.

Journal: Internal Sales

Entry:

 

Debit

Credit

Account 241

Inventory – Used Trucks

$400

 

Account 663

Cost of Sales – Internal Labor - Mechanical

$90

 

Account 681

Cost of Sales – Parts – Internal

$80

 

Account 242

Inventory – Parts & Accessories

 

$80

Account 247A

Inventory – Work in Process – Mechanical

 

$90

Account 463

Sales – Internal Labor – Mechanical

 

$300

Account 481

Sales – Parts – Internal

 

$100

Comments

It is recommended that the Internal sales of regularly stocked parts and accessories, other than parts and accessories sold on customer repair orders, be priced at COST PLUS 25%, but not to exceed the retail selling price of the item.

If preferred, a rate sufficient to cover the prime cost of the parts and accessories plus a pro rata share of the parts and accessories department overhead may be used for all internal sales.  To determine this rate, the steps below should be followed:

 

EXAMPLE

 

  • Estimated annual fixed overhead expense of the parts and accessories department

$48,000

  • Estimated annual amount of the parts and accessories department cost of sales

/ $185,000

  • Percentage Mark-up

26%

 

The internal selling price of parts and accessories equals cost plus 26%.

Note:

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.

681 Parts - Internal

Cost of Sales

Fixed Operations

Cost of Sales Synopsis

Account 681 is established to record the Cost of Sales for Parts sold on Internal Repairs Orders above.

Debits

Credits

  1. Cost of Parts sold to other departments

 

 

Example 1

Record the sale of a CD changer for a demonstrator unit in the amount of $335. The mechanical labor sale for CD changer installation is $85. The CD changer sale is $250.  The cost of internal labor is $25. The CD changer cost is $175.

Journal: Internal Sales

Entry:

 

Debit

Credit

Account 230

Inventory – Demonstrators

$335

 

Account 663

Cost of Sales – Internal Labor Mechanical

$25

 

Account 681

Cost of Sales – Parts – Internal

$175

 

Account 242

Inventory – Parts & Accessories

 

175

Account 247A

Inventory – Work in Process – Mechanical

 

$25

Account 463

Sales – Internal Labor Mechanical

 

$85

Account 481

Sales – Parts – Internal

 

$250

Note:

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.