Anyone Use Quickbooks for their Accounting? - Question

[logem]

To All,

Thanks for your replies in advance . . .

I have a block of Amboyna in inventory, purchased from a vendor for $40. - This is currently an inventory part.

I sawed the block into a quantity of 4 scales, 2 pair of Amboyna scales at 3/8" thick each . . . very nice burl; and figure that I now have 2 pair of scales worth $35 each.

How do I handle this in my inventory? This is value added work, in my opinion.

I could do a manual inventory correction . . . probably my best option, as I see it now. (Remove my block from inventory and add the two pair of scales)

Or, If I do an inventory build, using an assembly, then I cannot classify my new scales in the same category listing as my scales which have been purchased directly from vendors which are classified as a part in Quicken. (This would be better since it will track my use of the block to make the scales).

How should I best handle this?

I hope this makes sense. I know that this is somewhat trivial, but it what makes the accounting so difficult to me.

Sometimes, I think I should just completely forget about accounting for everything properly!

Mike L.

 

[dallastxco]

logem,

You're right, this is a case of value added. You should not "delete" them from your inventory, but rather move them from inventory of raw materials into a finished goods inventory. The best approach is to think of it in terms of the transformation of the materials and added value.
The process is: cash (asset) turns into raw materials inventory (asset). Then materials + labor= finished products, which go as inventory items or finished goods inventory (scales=asset).
In my opinion, it is critical to keep scales you made in a separate account from the scales you purchased so you can track their profitability separately.

If you have questions PM me and I'll be happy to help.

 

[logem]

Dallastxco,

Wow, your reply is better than what I would have ever received out of my ex-wife CPA, since she never could give a "".

I've got enough to ponder and investigate from your answer before before I send you a PM, but don't be surprised if you get one.

Thanks,

Mike L.

 

[Phil Dwyer]

It depends too on whether you sell scales and blocks of wood as as scales and blocks of wood or just use them in your making of knives. They're both assets. If you resell them as raw materials though they are sales (retail or wholesale) inventory. If you just use them in making your knives they are materials inventory. Tracking materials inventory is important in figuring the cost of goods sold. It also depends on how you track your labor. If you aren't selling the scales as scales, then in a sense you have already started working on a knife(s) with the block. Technically the two sets of scales still only cost you $40 for the raw material. The scales cost toward your cost of goods sold (finished knives) would be $20 each + labor, shop time, supplies. I'm not sure it is too important which way you do it, as long as you're consistent and transparent.

 

[logem]

My biggest issue is that these "new" scales may sit around for a year or so until I decide I want to build them into a knife. Additionally, I have multiple other amboyna blocks, and a snakewood log that I recently sawed. How do I move these from inventory to inventory? Sounds like my solution is moving between "raw material" and "inventory items" is what I need to learn.

At least I have some guidance now. Thanks to all.

Mike L.

 

[petah]

You added value to raw material with labor and use of your equipment.
Raw material (raw block or wood) + labor (your time you spent sawing them, inspecting them, etc...) + use of capital (equipment:saw, sandpaper etc...) = new scales (new product that you can use or sell)

The block is still in inventory. You just transformed it into a different more valuable state.

 

[Patrickknives]

Are you sure you want to get into this much detail?? If you are operating on a cash basis you just need the expence (purchase of wood) and then later the income (sale of knife). Why carry an inventory? I do some manual tracking to keep track of what my material costs are but I just estimate the cost of materials such as 8" of steel from a 36" bar.