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  #1  
Old 03-12-2009, 04:22 PM
fretley fretley is offline
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Chart of Accounts Clarification & Clean Up

Chart of Accounts/Account Type(s) Clarification Needed-specially COGS



What items should have acct type of COGS on chart of accounts?

I'm seeing on our that Vendor Discounts & Refunds, Dealer Discounts, Refunds New Equip , Euro Exchange & Rounding are assigned to COGS Acct type. Is this correct? Shouldn't the Discount and Refund accounts be set as Income Types? I'm in the process of cleaning things up and setting things right for the new year.
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Old 03-16-2009, 01:30 PM
fretley fretley is offline
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anyone willing to jump in here? A simple question I thought. Have posted the same in intuit forums and have no feedback from them either. Same with my customized report post........Did I do the unimaginable and "ask a stupid question?"
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Old 03-16-2009, 01:38 PM
songcon songcon is offline
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Chart of Accounts Clarification & Clean Up

Shouldn't the Discount and Refund accounts be set as Income Types?

You're totally correct. Discount and Refund are contra-account of Revenues and they should be correctly set that way, it's a correct way and proper way of classification.

Refunds normally set up as a separate item after gross receipts since the refunds could be generated as a much later time after the tax return had been file.

Sales Tax is also a contra account of gross sales but some people set it as a separate item on the income statement, it's "not correct" but it makes it easy to match the total deposits to the sales for the year.

Hope this helps
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Old 03-18-2009, 04:07 PM
fretley fretley is offline
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Question COA Clarification - Still Confused

Here is something I found on the Intuit forum site regarding accounts types to be associated with refunds and discounts. I must say I am confused. By the listing below I would say that the original set up is correct and I should leave settings to the COGS account and not change them to Income. I would appreciate anyone chiming in on this:

Trade discounts. The differences between the stated prices of articles and the actual prices you pay for them are called trade discounts. You must use the prices you pay (not the stated prices) in figuring your cost of purchases. Do not show the discount amount separately as an item in gross income. IRS Pub 334 Chapter 6 COGS, page 28 IRS Regs. Sec. 1.471-3(b) requires trade or other discounts to be treated as reductions in the purchase price of the inventory to which they relate, rather than as gross income. COGS is anything that directly relates to the sale of ***an*** item or items. Merchant fees as an example. The cost of an item is anything you pay to get the item, to build the item, or to make the item ready for sale. That includes shipping, import taxes, storage fees, etc etc. But all those costs have to be included in the per item cost - prorated. The IRS requires that costs be deducted (sent to COGS) in the year the item is sold, not purchased.
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Old 03-19-2009, 04:38 AM
RobJoy RobJoy is offline
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Bearing in mind that I'm in the UK, the rules I'd employ would agree with the IRS ruling. The principle is that inventory should be valued at actual total landed cost (as it goes into the Balance Sheet), then COGS only happens at time of sale, taking the whole cost item by item.

There is a question of materiality: the accounting principle that says 'don't sweat the small stuff'. So it isn't necessary to, say, distribute a $20 inward carriage cost across ten purchased items totalling $500, on the basis that it isn't going to change anyone's judgement of your business performance if you just post it straight to COGS as 'Miscellaneous charges'. Establish a rule to put a limit on the value of any cost or reduction you distribute to landed cost per item - say $50, or 10% of the item's basic cost.

So the only item I would query being a COGS account would be 'Refunds New Equip'. If this relates to stuff purchased as business assets - machinery, computers and such, rather than goods for resale, it should reduce the asset values, rather than go to the P&L.
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Old 03-19-2009, 08:19 AM
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lisa_mn lisa_mn is offline
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Quote:
Originally Posted by RobJoy View Post
...the accounting principle that says 'don't sweat the small stuff'.
That's the technical term, right?
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  #7  
Old 03-23-2009, 06:37 AM
Lisa1111 Lisa1111 is offline
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hi

You're totally correct. Discount and Refund are contra-account of Revenues and they should be correctly set that way, it's a correct way and proper way of classification.

Refunds normally set up as a separate item after gross receipts since the refunds could be generated as a much later time after the tax return had been file.

Lisa11
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