Accounting Question

[S T]

I am going in circles
Have a client -gas/convience store - uses a POS system that records sales, COG and Inventory.

I know that the basics on Inventory are Beg Inv plus purchases less COG = ending inventory.

The POS system is generating a $52,000 gain on Fuel (Gain/Loss), and I can't seem to find it. and have huge adjustments on the Inventory over and short.

Logic would tell me that Gas Invoices are missing as they are approximately $ 25,000 per load - but we have matched purchases to Bank EFT and purchase invoices - We have matched sales and accounted for the COG.

What am I missing? How can I make the $52,000 gain on Fuel Inventory go away??

Frustrated,

Thanks,

Sandy

[Nashville]

Could Be Anything

Sandy, hate to mention this, but it could be anything, but we would have to have more information.

If you are using a G/L accounting software, what is your ending balance in Inventory? What is your ending balance in Cost of Goods Sold? Does the system permit a "General Ledger Detail Report" on each of these two accounts?

Do the amounts flow into and out of inventory at the appropriate time? Should go in when product is bought, and go out when product is sold. If this is gasoline, make sure the credits go "out" at the same price the debits go "in" and not the selling price.

Did you inherit this set of books from someone else? If so, make sure the beginning balance in inventory makes sense.

This probably sounds so elementary it is probably beneath you, but all of the above can cause problems in COGS. If you have .pdf capabilities and want me to look at it tomorrow when I have time, send a private message to Snaggletooth.

[JohnH]

Ron said this already, but it's worth repeating. I'd say that most inventory discepancies occur when there isn't careful matching by the client of physical delivery of the goods vs the date the invoice is generated, received, and entered into the system. Since you have an error that's roughly the equivalent of two deliveries, this won't account for all of the problem unless you had the unusual event od opposite transactions at the beginning of the year and the end of the year. (Most errors of this type get repeated year-to-year, rather than doubling up.)

I like Ron's suggestion to check ho the inventory was valued. If someone valued an inventory at retail rather than at cost, that could easily distort the numbers big time.

There could also be some income-related distortions as well. Gasoline retailers sometimes negotiate rebates from the supplier based on volume, so if a year-end check arrived at the beginning of the current year and the current year's check arrived before year-end, that might account for the income discrepancy. Of course, there should also be a significant amount of cash in the bank (minus non-deductible withdrawals, capital expenditures, loan principal paymnents, etc) to explain the income.

[S T]

Thanks Snags and JohnH

I will go look at some detail GL
I didn't inherit this account, it has been a long time account for us after the fact accounting. Franchise set up a new accounting system POS to bridge system to QB, therein probably is my issue and discrepancy, so now posting daily in QB which I access.

I have access to the Bridge system to QB and reconciling QB entries - Garbage in/out - We have already found dropped purchases (invoices) on QB, but seems okay at the Bridge System, and I have verified with the Distributor on their site for purchases and $$ being drafted from the Bank.

I just can not locate where the "discrepancy is" between the two systems". Bridge system tells us that they take all of the POS downloaded and do nothing more with that info then convert to and then dowload to QB through a mapping account system.


No Rebates on Fuel. Timing has always been an issue and found that in one month - but doesn't appear if you look at the entire year, Jan-Dec

Seems like my beginning inventory is correct, as we did not have the issue in 2009 - but 2010 is giving me grief. I will go revisit 2009 where the NEW System took over mid-year, however, I thought I had balanced at the onset of the new system. I have tried to check the Bridge System and it does appear that the Inv valuation is at Cost not at Retail

Cash In Bank is good - we can reconcile all through the bank - there is a "Cash Holding Account" which I will take another look at - This system likes to use clearing accounts!

I have reconciled all of my sales tax to sales reported - and yes Sales have been a concern - but my COH seems okay (two accounts one for cash deposits and one for Paypoint Deposits)

No Accounts Receivable - totally Cash

COG is at the Cost percentage pre-programmed in POS- I did find where several were wrong and sales (included sales tax one month) and COG was wrong - those have been corrected.

I would like to take a laser pointer and just delete all of the systems over/short entries as they so cloud the issue - but to do 30 days x 12 months is really time consuming. A gas load or two gas loads daily.

Too much time and frustration - I just can't see anything now - and keep going around in circles Inventory - DR/CR, Fuel Gain/Loss DR/CR - if I adjust COG to offset Fuel Gain/Loss makes the profit margin higher (which it is as it stands with the $ 52K gain on Fuel in the Fuel Gain/Loss Account)

Thanks for your thoughts - I just know something is incorrect, but can't seem to find it

Sandy

[veritas]

Not sure what you mean

I am going in circles
Have a client -gas/convience store - uses a POS system that records sales, COG and Inventory.

I know that the basics on Inventory are Beg Inv plus purchases less COG = ending inventory.

The POS system is generating a $52,000 gain on Fuel (Gain/Loss), and I can't seem to find it. and have huge adjustments on the Inventory over and short.

Logic would tell me that Gas Invoices are missing as they are approximately $ 25,000 per load - but we have matched purchases to Bank EFT and purchase invoices - We have matched sales and accounted for the COG.

What am I missing? How can I make the $52,000 gain on Fuel Inventory go away??

Frustrated,

Thanks,

Sandy

by a $52,000 gain in fuel. Do you mean the ending inventory increased by $52,000? I would do as John said and check the value of the beginning inventory. Also I would compute the actual value of the ending inventory myself. Most storage tanks generate an electronic report showing the actual inventory on hand each day.

I would also check the balance owed to the supplier at the beginning of the year and the end of the year. Rarely are deliveries of fuel paid immediately upon receipt.

Gas station/convenience stores do not make for easy accounting.

While you are at it the store inventory is probably a disaster too unless a regular inventory is taken and adjustments made to the inventory.

[S T]

Reports

No Inventory is not over $52K - through adjustments the POS made -- The profit and loss has a Fuel Gain/Loss Account under expenses separate from COG that is being used to balance Inventory, It is showing the $ 52K gain which affects the bottom line Profit and Loss Stmt.

Before this new system I used on the p/l beginning inventory plus purchases - we had an ending inventory figure and then adjusted, for COG. It worked

The new system is not showing any of this on P/L - all purchase go to inventory - post daily for COG off of POS and pre-programmed amount - then using this Fuel Gain/Loss account (labeled as expense account) on the P/L

If inventory is over it credits inventory and debits the Fuel Gain/Loss Expense Account, if inventory is short it debits inventory and credits the Fuel Gain/Loss Expense Account. At the end of 2010 I have a $ 52K gain in Fuel Inventory - this just does not seem possible.

Part right now are my adjustments month to month to balance to Inventory accounts - the rest is Over/shorts that the system entered. My adjustments to match the "supposed" ending inventory in some months are huge - like $ 28K

If I do a simple spreadsheet in excel for Ending Inv plus purchases less COG - I show at the end of Dec 2010 -
I would have a negative inventory - and that can be either.

I don't think the client has $ 52,000 in gas just hanging around in his tanks, when he has a daily load - timing is an issue from 10PM at night to 6AM in the morning - but we can account for that day to day. $ 52K is about 19,000 - 20,000 gallons of gas. Average load delivered is approx $ 25,000 which about 8,700 gallons which include all of the State taxes.

S

[veritas]

No Inventory is not over $52K - through adjustments the POS made -- The profit and loss has a Fuel Gain/Loss Account under expenses separate from COG that is being used to balance Inventory, It is showing the $ 52K gain which affects the bottom line Profit and Loss Stmt.

Before this new system I used on the p/l beginning inventory plus purchases - we had an ending inventory figure and then adjusted, for COG. It worked

The new system is not showing any of this on P/L - all purchase go to inventory - post daily for COG off of POS and pre-programmed amount - then using this Fuel Gain/Loss account (labeled as expense account) on the P/L

If inventory is over it credits inventory and debits the Fuel Gain/Loss Expense Account, if inventory is short it debits inventory and credits the Fuel Gain/Loss Expense Account. At the end of 2010 I have a $ 52K gain in Fuel Inventory - this just does not seem possible.

Part right now are my adjustments month to month to balance to Inventory accounts - the rest is Over/shorts that the system entered. My adjustments to match the "supposed" ending inventory in some months are huge - like $ 28K

If I do a simple spreadsheet in excel for Ending Inv plus purchases less COG - I show at the end of Dec 2010 -
I would have a negative inventory - and that can be either.

I don't think the client has $ 52,000 in gas just hanging around in his tanks, when he has a daily load - timing is an issue from 10PM at night to 6AM in the morning - but we can account for that day to day. $ 52K is about 19,000 - 20,000 gallons of gas. Average load delivered is approx $ 25,000 which about 8,700 gallons which include all of the State taxes.

S

It is not uncommon for fuel inventory to reach that value. But verify it is correct.

In states such as Arizona the fuel is billed at a temperature corrected or "net gallons". I have seen fuel inventory gains of over 10,000 gallons in one year.

[S T]

I have

5 Stores on this client - and there is not one other store that shows a Gan on Fuel as an expense account (which would lower my COG) According to the "bridge account" info I should be running about $ 900 to $ 2,000 loss on net fuel placed in tanks each month due to evaporation and spillage, etc. Not a $ 52K gain in Fuel and lower COG. And then be running a negative throughout the month on Gas Inventory. I am as high as $ 47K negative Inventory in a few months based on the bridge report mapping to QB.

In spite of what some people might think, the Gas Dealers, run on a very small margin of profit - about 4.5 cents on gallons sold - a little higher on diesel grade

[veritas]

What is the fuel margin

5 Stores on this client - and there is not one other store that shows a Gan on Fuel as an expense account (which would lower my COG) According to the "bridge account" info I should be running about $ 900 to $ 2,000 loss on net fuel placed in tanks each month due to evaporation and spillage, etc. Not a $ 52K gain in Fuel and lower COG. And then be running a negative throughout the month on Gas Inventory. I am as high as $ 47K negative Inventory in a few months based on the bridge report mapping to QB.

In spite of what some people might think, the Gas Dealers, run on a very small margin of profit - about 4.5 cents on gallons sold - a little higher on diesel grade

including the gain? We run about a 20 cent margin here.

[veritas]

sounds like

. I am as high as $ 47K negative Inventory in a few months based on the bridge report mapping to QB.

missing invoices.

[S T]

I have always thought it was missing fuel invoices, but as I said, I can't find them, either through the purchase invoices or the Bank EFT. I have accounted for all EFT withdrawals. We have spent hours matching- with this new system in place. I am thinking at least two loads in 2010 and possibly 3 loads.

I doubt the distributor overlooked a delivery and not electronically posted the invoice or drafterd payment - but then I have been having issues with them reporting to the State of California in that last 18 months on the prepaid tax per gas load.

We just recently found a $ 76K error on the Distributor Reporting for prepaid Sales Tax, as they have not been able to keep their Dealer Accounts in order.

My client would like a 20 cent margin, but has usually been around 7 to 8 cents on gas per gallon, and recently in 2010 and 2011 dropped to about 5 cents.

Keeps the gas volume up, for perks on the convenience store credits - where he has a higher profit margin, but now that is even dropping.

S

[BHoffman]

Before this new system I used on the p/l beginning inventory plus purchases - we had an ending inventory figure and then adjusted, for COG. It worked S

Inventory Beginning Balance + Purchases - Inventory Ending Balance = COGS.

COGS is the "plug" number. I wouldn't try to determine the correct ending inventory number using this equation unless I was sure that all of the other numbers were correct. If you are sure of every number except COGS, then the above equation should at least get you close enough for government work

Remember that inventory errors are eventually self-correcting. Inventory that turns over quickly should quickly self-correct. How does it look in the first month(s) of 2011? How is it different from your own computed COGS balance?

Pretty sure you have the year end report of actual ending inventory in the tanks, reconciled the cash, accounted for undeposited funds, confirmed any accounts payable to the vendor and the sales tax payable account would be easy enough based on 20/20 hindsight.

If you can reconcile all of your balance sheet accounts, then you have pretty good assurance that the net income (bottom line) number is probably correct.

This might be a matter of just taking the reins and adjusting the COGS each month according to the equation, and keeping good workpapers to justify the adjustment. If you know the new system is flawed, then your own computations would be more reliable.

[S T]

More

Thanking all that participated in this earlier thread and Hating to bring this thread to the "surface" AGAIN -
I am still at my "wits end" as nothing makes any sense on this new accounting program and as a lot of us have entity returns due by 9/15/11.

Sales match, sales tax all corrected and matches , purchases for Inventory matches and is all paid for and I still have this $ 52K in gain on Fuel Inventory - accounts payable for the gas loads at the end of 12/31/10 for purchases and paid 1/2011 are correct -

If I presume that 12/31/09 Ending Gallons is correct, and I add purchases (Gallons) that match invoices, and subtract Gallons Sold through 12/31/10 - I should have a negative in gallons. -- Where did it go? I can't sell what I don't have in the tanks

Myself and the t/p believe to be incorrect this $52K Fuel Gain - What am I Missing???

Accounting program was running merchandise over/shrink as fuel/gain loss - matching to fuel $ reports daily - there are many days from Jan 2010 - July 2010 that just don't make any sense - such as opening stick is different on various sampling days from the prior ending - add the purchase gallons and then subtract the sales gallons and the ending gallons don't compute (interim daily reports) but did seem to corect within the 12 month period - Had 4 months that the Stick Readings beginning and ending were totally incorrect - just based on mathmatics.

I just don't know where to correct in the accounting- looks to me it is a computer problem at the "site" - What account do I use when A/P is correct, Cash or Bank is Correct - I can correct inventory but if I use the Fuel Gain/Loss is "skews" the Profit and Loss. Oh and by the way - we have checked the COG - and that is within tolearance of the GPM.

Has to go somewhere and I just can't wrap my "feeble brain around it".

Stick (Gallons) is taken 3 times daily through a computerized system - although the t/p does not always print out the reports and relies on the NEW "FAILED" computer system.

Does anyone have any words of advice or words of wisdom on how to show this in the Books and have the Form 1065 Income/Expense and Balance Sheet appear correct.????

Thanks to All,

Sandy

[Mo Sheets]

Back to the basics...

I'm sure you've done this already, but here goes....

1) Search the records for a MISSING account. Trace each account back and forth from the journal to the ledger.
2) Divide the out-of-balance amount by 2 and search for this amount. A transaction could have been added instead of subtracted.
3) Divide the out-of-balance amount by 9. The error could be:
a) slide - writing $400 as $40
b) transposition - writing $2,100 as $1,200

When all else fails...
I had a client that the petty cash payouts never balanced.....we discovered that one of the servers was not being picked up on the new report. Once a change was made to the program to list ALL servers, the reports tied.

Good luck!

Mo

[JG EA]

Is there someone who can help you? Some of my worst problems have been because I overlooked or just didn't see something.

Now, this reasoning is really dumb - I'm just thinking out loud and replying since you asked, but I don't know about this industry as well a the other posters.

How is the money in COG listed? Purchase price for your client? If he buys $25000 and sells $25000 the extra 5 cents per gallon shows up on sales and the inventory is taken out at the price it was purchased?

So, you are saying gas sales are $52,000 too low right? If they had sold $52000 more, the beginning and ending inventory would be correct? That is about 13000 gallon of gas? As one poster said there can be large discrepancies, but that would be less gas inventory rather than more??? If you just take the higher inventory at the end of the year (if correct) and reduce the COG how would that impact your client? Do you know for sure what the beginning and ending inventory is?