Parts Inventory Adjustment

• ACCOUNT EXPLANATION
• TRANSACTIONS
• COMMENTS

Provision for shrinkage in parts inventory resulting from obsolescence, theft, and breakage.

*Refer to Chart of Accounts for current applicable Sales/Cost of Sales account numbers

• Use of this account together with Account 1430, Allowance for Parts Inventory Adjustments, will minimize the effect on net inventory value and on this expense in the month the physical inventory is recorded.
• The monthly provision should be based upon past experience combined with any necessary allowance for changes anticipated in the future.
• Proceeds from the sale of obsolete or damaged parts that have been written off should be credited to this account.
• Monthly accruals of the expense of a physical inventory by an outside service should be charged to Account 7690, Inventory Control—Parts.
• Since special treatment of this account may be required for income tax purposes, dealers should consult tax counsel.