Im having a little trouble figuring out the correct course of action to take if i was to break down inventory items.
hypothetical Example;
I buy 5 laptops at auction @ £500 total
I inventory the items in manager and value them @ £100 per unit
one week later i decide that 1 of the particular laptops is worth more to me if broken down and sold of as parts.
How do i account for this?
I would be 1 laptop (£100 stock) down but would have multiple items for resale?
At a guess i think i would remove the laptop from inventory by editing ammount in hand to 4 instead of 5 and then dividing the £100 by how many parts i aquire from the laptop to give them their value when entering them as individual inventory items.
Would it be ok to do this or is there a “correct” procedure to accomplish such thing?
The ideal approach would be if Manager allowed multiple output items from single and/or multiple input items. But while that has been promised eventually, it isn’t here yet. So the steps I would take are:
Write off one laptop in the Write-offs tab. Post the transaction to an expense account created for this purpose called something like Parts clearing or Salvage write-offs. This step will reduce both quantity and value of the laptop inventory item. The value reduction will now be balanced by the expense. Note that you cannot change quantities by simply editing. The costs associated with those items must go somewhere, so you are temporarily putting them into this expense account.
Define new inventory items for the parts you are going to salvage from the laptop.
Create a journal entry debiting Inventory on hand and the parts you just created and crediting Parts clearing. You can have many debit lines and only one credit line.
Actually, now that I think about it more, I guess you can skip the write-off to the intermediate account. You should just be able to do everything with a journal entry. Debit the new inventory items and credit the laptop item.
You would do a Journal entry, for the first line select the Account as Inventory On-Hand + Inventory item + Qty = 1 with credit = 100. Then repeat for the parts with debits until = 100
Im just getting into journal entries in my studies so didnt even realise it could be done so easily but it makes perfect sense now!
While on subject of inventory, im looking into the methods of FIFO and LIFO to try and decide what system to use (not sure it matters to me) and starting wondering how i would control a system in manager, if manager has a setting to choose or if manager uses a specific method for end of year stock valuation?
If i use FIFO and have 3 batches of the same items bought on different dates (non perishables) would i simply select from the older inventory batch when making orders to abide by FIFO rules?
Do i even need to be worrying about this?
Company will be a sole trader/proprietor, turning over less that VAT threshold and all transactions will be cash basis if this matters.
I know manager is going to give me the value of my current stock at any given time but im wondering if i have to do anything in regards to a chosen method or if i can let manager get on with it?
Its funny to me how i spend time researching things to a point where i get overwhelmed with information and guysNgirls like you can grab a sentence from me and make everything seem logical again.
