Internal Accounting, Example Promotional Stock

Summary

This article shows an example of how to deal with items given away for promotional purposes. It assumes that you can create nominal ledger centre and understand how to invoice stock from Point of Sale.

If you are unsure about how to create nominal centres and invoice stock from Point of Sale, please review these articles.

• How do I Create a Nominal Code?
• Selling Stock at Point of Sale

The Philosophy Behind Catalyst Internal Accounts

Move stock internally between departments, attributing the Cost against a department and the flexibility to show an internal profit, if required.

Details

In this example we are going to give away some promotional stock to the value of £100.00 showing no profit on the internal movement, thus charging the movement at cost.

System Goals for the movement of stock

• Reduce the stock quantity when an item is given to a potential customer.
• Show the cost of this against the Clothing & Merchandising dept.

Set-up

• Create a Sales Ledger account called "Internal Promotional Sales", e.g. "INT001".

On the "Invoicing Tab"

• Make the account VAT exempt.
• Make the Centre Modifier ""I"", this means...

When an invoice is produced onto this account the sales centre stamped onto the invoice will be the default centre stamped onto the stock code, stock group or if they're not set, the stock parameters. In this example we shall use centre 100, Parts Sales Retail that links to nominal centres 11100 Parts Sales Retail which is stamped on the stock code. When the month end updates the nominal, the system looks at the centre modifier and if it is set, it then checks the parameters for how to proceed with the update, because the concept of the centre modifier is to add the modifier character to a position on the centre it is to update. So, in this example the system would add the letter I into the sixth position of the nominal code, therefore updating centre 11100I Parts Sales Internal

.

• Set the Internal Flag to YES.
• Create a profit & loss nominal centre, cost of sales, called Promotional Costs and assign this to the default payment centre.

   Centre 12200I Promotional Costs    

• Set the "Cash Sales:" flag to 'Yes' so that the internal debtor is cleared immediately.

On the "Group/Analysis Tab"

• Make the account group "INT"

On the "Stock Tab"

• Set the "Cost Of Sales" code to be '12200I' - Promotional Costs.
• Change the Account Pricing to charge at zero.

If you unsure how to set the account pricing, please review the following article How do I Set Account Pricing for a Customer?

The Process

• Using Stock Control, Point of Sale, invoice the item of stock at zero price to the customer against sales ledger account "INT001"
• The Payment screen will appear as usual but default the payment type to 12200I Promotional Costs.
• Click [Post] to complete the transaction.

Accounting Entries

Sales Ledger Invoice

CR  11100I     Parts Sales Internal             0.00
DB  Z994       Debtors                          0.00

Sales Ledger Receipt

CR  Z994       Debtors                          0.00
DB  12200I     Promotional Cost of Sales        0.00

Stock Movement

CR  Z922       Stock Value                   -100.00
DB  12200I     Promotional Costs              100.00

COS                            ==========
   12200                          -100.00     Promotional Cost of  Sales
                               ==========
NETT LOSS                         -100.00

SUMMARY

The above results in a loss on the profit and loss for the promotional costs.

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Keywords AND Misspellings

Accounting