[LongShot]

My employer is trying to figure out exactly how they should be accounting for shortages or overages on inventory ordered from vendors. Without getting into detail, I’ll just say that they try to use FIFO and the way they are currently is nowhere close to correct.

For shortages, I told them to simply not pay for what was not received, to notify the vendor, and then pay for the goods once received. I think they understood that part just fine.

For overages (it’s not uncommon for a vendor to send slightly more product than what was ordered, but then to never bill us for it at all), this is where my question is. Basically, I was wondering if anyone could verify exactly how this should be handled and, if so, where I could find an authoritative source to show to them regarding this? My initial thought was to simply allocate the cost of goods actually ordered and paid for among all of the product received to represent the actual cost of the inventory. Their thoughts have been to either record the excess inventory at a $0 cost, or to record it at the actual cost that would have been paid (even though they didn’t pay anything for it).

Any help I could get would be great!

FAR - 75
AUD - 72; 87
REG - 64; 74; 84
BEC - 88

Done!!

[taxman89]

See this would be a totally awesome job. Actual real person situations, much more fun than tax. I have not clue what the official correct answer would be, but i think what you said makes sense. Either return the goods not paid for (which is the converse of what you are doing with shortages, so you have more consistency there) or, if your supplier doesnt really care because its such a small amount i would take your actual cost and spread it over actual goods received since that would be a more accurate cost of goods than giving it a 0 or retail price.

but i work in the corporate tax dept of a multi-national company so i have ZERO experience in anything close to this 😀

Aud-75 3x I knew i never liked you
Bec-77 1x being in the bubble is stressful
Reg-82 4x its not me its you...and no we cant be friends
Far-78 1x easiest section

[taxman89]

See this would be a totally awesome job. Actual real person situations, much more fun than tax. I have not clue what the official correct answer would be, but i think what you said makes sense. Either return the goods not paid for (which is the converse of what you are doing with shortages, so you have more consistency there) or, if your supplier doesnt really care because its such a small amount i would take your actual cost and spread it over actual goods received since that would be a more accurate cost of goods than giving it a 0 or retail price.

but i work in the corporate tax dept of a multi-national company so i have ZERO experience in anything close to this 😀

Aud-75 3x I knew i never liked you
Bec-77 1x being in the bubble is stressful
Reg-82 4x its not me its you...and no we cant be friends
Far-78 1x easiest section

[Author]

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