Ending inventory

[DTS]

My client's Sch L matched perfectly to the company b/s until I asked him today what his ending inventory was. When I put that into COGS, Sch L assets are off, higher by that much.

Seems like I should show this, so what is the fix on his end or my end, for that matter?

Thank you,

Dennis

[Snaggletooth]

Whichever is Correct

Hey Dennis, determine (with your client) which number is actually correct - the inventory on the balance sheet or the inventory he gave you for Cost of Goods Sold.

If the balance sheet is based on typical accounting, and you end up with a higher inventory, that means the profit will be higher. If you work through the Cost of Sales calculation on Page 2, this will be confirmed.

Higher profit means that Retained Earnings will be higher. For example, if inventory has risen by $5,000, then your cost of goods sold will be $5,000 less, your profit will be more, and your retained earnings are higher by $5,000.

If the balance sheet was "in balance" prior to increasing the inventory, it should still be in balance because Assets have increased, and Retained Earnings have increased by the same amount.

[DTS]

Inventory

Snags,

I believe he has adjusted something out of sales, which was removing the $ amount out of sales for the cost of a unit, which was also showing a negative amount on the reports, but has not accounted for it somewhere else, like inventory. This is just a guess on my part, but I have seen him and this pattern before.

Thank you for the clear explanation and I will go through this with him, sale by sale, if need be. In addition, when I asked him about the closing inventory, he told me it was "around" this or that, so when we work through this, this may not be an issue. He is supposed to email the inventory report to me later.

Thanks again Snags!

Dennis

[BOB W]

Dennis>>>> Call Me................

[DTS]

Call

Bob,

I will give you a call this afternoon. I am going to call the client in a few minutes and see what needs to be adjusted, if anything and then will be better informed when I call. I'm sure something needs to be tweeked and I believe I know just where to look. Afterward, I need to hit to road for client meetings this morning, so I won't be back until early afternoon.

Thanks for the offer!

Dennis