October 30, 2016 admin

Inventory—Body Shop Materials

Assets

INVENTORY—BODY SHOP MATERIALS ASSET ACCOUNT
1442

ACCOUNT EXPLANATION
Cost of body shop materials on hand, including paint, thinner, lead, masking tape, rubbing compound, sanding discs and undercoating material.
TRANSACTIONS
  Jrnl. Dr. Cr.
  Purchase of paint on open account P
    Inventory—Body Shop Materials 1442
      Accounts Payable—Trade 2100
             
  Body Shop material costed out at time of sale PS
    Cost of Sales—Body Shop Materials 6850
      Inventory—Body Shop Materials 1442
             
  Adjustment to increase inventory account to agree with physical inventory SE
    Inventory—Body Shop Materials 1442
      Cost of Sales—Body Shop Materials (excl. paint) 6850
COMMENTS
  • The use of this account for recording purchases of body shop materials, rather than charging them to expense at the time of purchase, provides more accurate accounting data for use in controlling body shop costs and profits.
  • Due to the nature of body shop materials and the manner in which they are used, the cost of body shop material sales, in most instances, can only be estimated, usually in relation to sales amounts.
  • Body shop materials, including paint, should be physically inventoried at month end. The balance in this account should be adjusted monthly through Account 6850, Cost of Sales—Body Shop Materials, to agree with the physical inventory value.
  • To facilitate more accurate body shop job costing, you may wish to keep track of paint purchased for specific jobs separately from other body shop materials. Account 1448 is available for that purpose. Paint purchases should be costed out at actual cost at the time of sale, rather than using the percentage method that is often used to other body shop materials.
  • If you use this method, paint should be physically inventoried at month end, and the balance in this account should be adjusted monthly through Account 6851, Cost of Sales—Body Shop—Paint. This is a subsidiary account to Account 6850, Cost of Sales, Body Shop Materials. Account 6851 is not shown on the financial statement.