Theft Loss

[S T]

Accounting Question, Where to report on tax form

Retail - Lottery Tickets

Discovered theft of $11,000+ of Lottery Tickets (we think accumulated over a period of some months). How to record in the Accounting Records?? Second part of the question, how to report on the Tax Forms, (Inventory Adjustment or on forrm 4684)

Thanks,
Sandy

[Snaggletooth]

Cost of Sales

Sandy I think theft is so common in convenience stores and other stores that sell lottery tickets that a theft should not be considered an extraordinary item. I would report the cost of these stolen tickets as cost of sales.

Get ready for an onslaught of comments, because I'm sure there are those who will disagree, and present arguments that a theft is a casualty no matter if a kid steals a banana.

I'm not sure how California does it, but in Tennessee the tickets are actually property of the state until the retailer opens up a pack of 1000 scratch-offs. Multi-state contests such as Powerball and MegaMillions are live sales at the point of cash register. In my state, the theft is of state property and not that of the retailer. When the state assesses the cost of these tickets against the retailer, the transaction then becomes a [cost of sale, casualty loss, pick one]. Thus the theft could occur on December 29, and if the retailer is not assessed until January 2nd, he does NOT have a deductible loss in the prior year.

But I'm not sure whether ownership of the tickets remains with the state or transfers with possession in California.

How's that for a straight-up "yes" or "no" answer? No nuclear options here, my friend!!

[veritas]

I vote for cost of goods. I had a same situation just recently.

[S T]

Theft

Thanks Snags and Veritas for the confirmation to handle the theft through the cost of goods/inventory.

For this t/p, lottery delivers the tickets and they are receipted into the inventory (point of sale system) and bill is paid through auto EFT. If at some point in time, the inventory of lottery tickets is too high, the t/p can return the lottery tickets to Calif Lottery and generate a credit to be applied to subsequent purchases of tickets. So for Calif I would think the ownership belongs to the retailer.

Sandy