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Old 01-03-2018, 10:10 AM   #1
heineica
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Default Inventory

Currently using QB2015. I have set up corn inventory per your description in chapter 8 of your Farm Accounting Cookbook. However I have set COGS account on the items tab to an income account called Corn Inventory Adjustment. On the Adjust Quantity/Value on Hand tab I also set the adjustment account field to the same account. This appears to be working. Am I missing something?
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Old 01-03-2018, 10:53 AM   #2
FlagshipTech
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Default Re: Inventory

I can't tell exactly what all you are doing, from your description. I'll do a bit of guessing, but forgive me if I misunderstand. (Some screenshots would help. So you may want to continue this conversation by email, where they are easier to pass back and forth: mrw@goflagship.com.)

You say "This appears to be working." but I doubt it will work in the long term. If Corn Inventory Adjustment is an income account, the dollar amounts you enter in the Adjust Quantity/Value window would have to be exactly equal to the COGS amounts which QuickBooks posts when you enter a corn sale, otherwise you'll have either a positive or negative amount showing up for Corn Inventory Adjustment on your Profit and Loss reports--not good!!

The grain inventory discussion in Cookbook Vol. I is minimal and a bit outdated. Almost the entire Cookbook Vol. II, Raised Farm Production Inventories, Sales, and More... is devoted to farm inventories. I hate to recommend that you "buy something", but it really would get you much farther, with a lot of new ideas, techniques (like how to track cash sale contracts in QuickBooks), and explanations, if you are doing inventories of things you have produced, like corn.

By the way, in Vol. II, instead of using Retained Earnings I suggest setting up a separate Equity account (named Capitalized Inventory) to use for COGS and as the Adjustment Account for inventory adjustments. By using an Equity account, the offsets or differences between COGS and other adjustments "disappears" on financial statements; or if you want, that account's balance can be closed to some other "real" equity account, but it isn't really necessary.

We released Vol. II in 2017, so it's quite new. Have a look at the Table of Contents, etc. and I think you'll see a lot of benefit for what you are doing. Info on Vol. II is here:

http://www.goflagship.com/cbk2.html

...and you can get it from us or from Amazon.com.

But if you have other questions about all this, I'll try to address them. (Again, screenshots along with your explanation might help.)
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Old 01-05-2018, 01:22 PM   #3
heineica
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Default Re: Inventory

Thank you for responding

I already have purchased Vol. 2 and have been reading though it. I found it useful but I am using the Accrual method and not Cash.

What you describe in your email is exactly what I am seeing. My Corn Inventory Adjustment will always have a negative or positive balance.

Under my current method I make one adjustment to my Corn Inventory asset account at the end of the year. That adjustment is put into an expense account called Cost of Sells – Corn. That too could have a positive or negative balance, depending on how my inventory and its value have changed. I see this as achieving the same end. My old method is simple but does not give any useful information. I will talk to my accountant more about it this week.

My question would be how should I set up my corn inventory using accrual accounting?

Thank you
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Old 01-05-2018, 07:50 PM   #4
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Default Re: Inventory

Yeah, tough to apply much from Vol. 2 to an accrual situation.

Lots of farm businesses doing accrual tax filings essentially keep cash basis (or mostly cash basis) records, to which their accountant makes extensive adjustments at year's end for tax purposes. That's not quite the same situation as full accrual accounting, which I believe you are working toward.

So I don't really know where to suggest that you start. The standard accrual approach for something a farm produces would be to handle like manufacturing inventory: track it as a Work in Process (WIP) inventory (to which the cost of seed, fertilizer, chemicals, etc. get assigned during production), and at harvest, transfer the WIP inventory value to the a Corn Item as its inventory value.

But I cannot know whether you are prepared to approach the job that way.

> I will talk to my accountant more about it this week.

That will probably be the best place to start. But be aware that many CPAs are not well versed in the "right" (easy/automated) way to do things in QuickBooks. So if you run into something your accountant suggests which you question, you may want to ask for detail either here, or in Intuit's forums (community.intuit.com), or one of the excellent QuickBooks groups on LinkedIn.com, such as the QuickBooks Tips & Tricks group run by Ruth Perryman.

(Your question will be exposed to a wide range of knowledgeable people if you post on community.intuit.com or LinkedIn.com.)

...reply back when have another question, or to let us know how you got your problem addressed.

Mark Wilsdorf
Flagship Technologies, Inc.
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