Re: Off-Topic: Accounting question - Mailing list pgsql-general

Oliver Elphick wrote:
>
> Mike Mascari wrote:
>   >I have a quick accounting question. In the evaluation of Cost of
>   >Goods Sold, one can use 3 different methods for evaluating
>   >inventory: LIFO, FIFO, or Average Warehouse cost. In an application
>   >which allows the user to adjust inventory quantities, if the user
>   >discovers that the physical inventory in a cycle count is less than
>   >the electronic accounts, its easy to attribute the missing inventory
>   >as shrinkage. But what if the user discovers an on-hand quantity
>   >that is greater than the electronic accounts? For example:
>   >
>   >Jan 01, 2001 - Bought 1 Pencil for $3.00
>   >Jan 03, 2001 - Bought 1 Pencil for $3.50
>   >Jan 21, 2001 - Bought 1 Pencil for $4.50
>   >
>   >Total:
>   >
>   >3 Pencils
>   >$11.00
>   >
>   >However, when the cycle count is performed on Jan 31, 2001, 2 more
>   >pencils are discovered. What do Generally Accepted Accounting
>   >Principles say regarding the value of the 4th and 5th pencils? If a
>   >sale of a pencil occurs on Feb 01, 2001, using LIFO, what is the
>   >COGS?
>   >
>   >Oliver?
>
> I think it depends on how you account for the difference.  Your
> possibilities are:
>
> 1.  Ignore the discrepancy and lose the surplus  (OK with pencils
> perhaps, but not with gold bars!)
>
> 2.  Assume that there has been an error in issuing stock - some other
> item may show a deficit of 2; if that seems a likely source of error
> do a journal to correct both items.
>
> 3.  Introduce the extra stock by a transaction; this will either be (a) at
> zero cost (which will affect your averages) or (b) at an appropriate cost
> such as most recent, which will require a suspense account entry to
> balance it.
>
> Realistically, option 1 will cause least administrative cost and is
> most likely to be used even for high-value items, unless staff are
> exceptionally honest.  Option 2 is nice if a suitable deficit can be
> identified.  Option 3(a) removes the problem at the cost of some
> disturbance to averages and option 3(b) transfers the problem to the
> suspense account, from which it will effectively be lost at yearend.
>
> If I were auditing such items, I would be interested to see if there
> were any pattern to them that might suggest a programming error, or
> some other irregularity.
>
> I'm not aware of any official directives on this subject; I think that
> the situation does not usually arise (deficits, on the other hand,
> are more common...).    But I'm not really up-to-date on accountancy
> these days.

Thank you. We're writing some software to maintain inventory for a
retail business and allow for physical counts using Windows CE
devices (talking to a PostgreSQL database, of course). Since the
retailer has the option of using LIFO, FIFO, or Avg. Warehouse cost,
we'll probably just write code to allow them to decide what to do
with the discrepancy.

Thanks again,

Mike Mascari
mascarm@mascari.com

>
> --
> Oliver Elphick                                Oliver.Elphick@lfix.co.uk
> Isle of Wight                              http://www.lfix.co.uk/oliver
> GPG: 1024D/3E1D0C1C: CA12 09E0 E8D5 8870 5839  932A 614D 4C34 3E1D 0C1C
>
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