Internal Accounting, Example Promotional Stock

Summary

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

• 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

• Reduced 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 sales ledger account called "Internal Promotional Sales" "INT001"
• 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 code group or if they're not set; the stock parameters. In this example we shall use centre 100, Parts Sales Retail that assigns to nominal centres 11100 Parts Sales Retail that was stamped onto 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 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

• Make the account group "INT"
• Create a profit & loss nominal centre, cost of sales, called Promotional Cost of Sales and assign this to the default payment centre of the sales

ledger account.

   Centre 12200 Promotional Cost of Sales.    

• Change the CASH SALES flag to "NO" if you want accounts department to clear the debtor and the end of the month or YES if you would like the account to be cleared at the point the invoice is created.
• Change the Account Pricing to charge at cost.

• How do I Set Account Pricing for a Customer?

The Process

• Using Stock Control, Point of Sale, Invoice the item of stock to the customer against sales ledger account "INT001"
• If the CASH SALES flag is set to NO then the accounts department should clear the debtor as part of their month end procedure.
• If the CASH SALES flag is set to YES, the system will prompt the payment screen as usual but default the payment to 12200 Promotional Cost of Sales

Accounting Entries

Sales Ledger Invoice

CR  11100I     Parts Sales Internal          -100.00
DB  Z994       Debtors                        100.00

Sales Ledger Receipt

CR  Z994       Debtors                       -100.00
DB  12200      Promotional Cost of Sales      100.00

Stock Movement

CR  Z922       Stock Value                   -100.00
DB  11200I     Parts Sales Internal COS       100.00

SALES
   11100I                          100.00     Parts Sales Internal

COS                            ==========
   11200I                         -100.00     Parts COS Internal
   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 cost of sale because, Parts Sales Int and Parts COS Int should be contra'd off.

If the nominal codes are coded appropriately (by department) producing management accounts based in excel to show it more effectively, can be achieved.

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Keywords AND Misspellings

Accounting