October 30, 2016 admin

Allowance for Parts Inventory Adjustments

Assets

ALLOWANCE FOR PARTS INVENTORY ADJUSTMENTS ASSET ACCOUNT
1430/1432/1435

ACCOUNT EXPLANATION
Estimated shrinkage in FoMoCo parts inventory resulting from obsolescence, theft, breakage, etc., since the previous physical inventory.

Note that if you are tracking Ford, Lincoln and Non FoMoCo parts inventories separately, you will need to estimate and track parts inventory adjustments separately also. Supplementary accounts should be used to this purpose.
TRANSACTIONS
  Jrnl. Dr. Cr.
  Monthly provision for shrinkage in parts inventory SE
    Parts Inventory Adjustments—FoMoCo/Quick Lane 6570
      Allowance for Parts Inventory Adjustments—FoMoCo/Other/Quick Lane 6585 1430
         
1432
            1435
             
  Write off obsolete or damaged parts scrapped G
    Allowance for Parts Inventory Adjustments—FoMoCo/Other/Quick Lane 1430
      1432
      1435
      Inventory—Parts—FoMoCo 1400
             
  Reduce parts inventory account to physical inventory value G
    Allowance for Parts Inventory Adjustments—FoMoCo/Other/Quick Lane 1430
      1432
      1435
      Inventory—Parts—FoMoCo 1400
             
  Write off remaining balance in this account after physical inventory adjustment has been recorded G
    Allowance for Parts Inventory Adjustments—FoMoCo/Other/Quick Lane 1430
      1432
      1435
      Parts Inventory Adjustments—FoMoCo/Quick Lane 6570
6585
COMMENTS
  • Use of this account will minimize the effect on net inventory value and on parts inventory adjustment expense in the month the physical inventory adjustment is recorded.
  • The monthly provision should be based on past experience, if available, and on future expectations of the difference between book inventories and physical inventories. The estimated shrinkage should be prorated equitably over the months between the physical inventories.
  • Proceeds from the sale of obsolete or damaged parts that have been written off should be credited to Account 6570, Parts Inventory Adjustments, Account 6585 Quick Lane.
  • Since special treatment of this account may be required for income tax purposes, dealers should consult tax counsel as necessary.