I have been debiting (5001) Materials Imported and crediting (1003) Finished Goods. Is this right? I thought it would decrease the figure of Materials Imported on the Chart of Nominal Accounts, but it doesn’t. Is that figure meant to go up or down when moving to Finished Goods?
If materials imported were an expense when you imported them, and finished goods is an asset, then you’ve got the credit and debit reversed - to reduce an expense code you credit it and to increase an asset code you debit it.
But I’m not an accountant so I can’t say whether this is the right way to handle it. My gut feeling is that this sounds sensible for a year end adjustment but not necessarily as a way to work day to day.
Hey there, thanks for your reply. I tried this, but it decreased Finished Goods as well as decreased Materials Imported. Originally it was increasing Materials Imported and increasing Finished Goods. Should I not be looking to decrease Materials Imported and increase Finished Goods?
I think you need to run things by your accountant or a trained book-keeper to check how you’ve been recording things. Ordinarily both purchases/expenses (5000+ codes) and assets (1xxx) would have a debit balance, so if you say that debiting the “finished goods” code has “decreased” it then that means it must previously have had a credit balance rather than a debit one (making it a liability rather than an asset).
Like I say, it needs someone familiar with your type of business to take a look and explain how these things should be recorded. I’ve never used the materials or finished goods codes myself, for my business I only need the general sales/purchases plus end of year adjustments for stock in hand.
According to my Chart of Nominal Accounts, Materials Imported is on the red side and Finished Goods is on the green side. I had a look within the Materials Imported, and all the purchases there were on the red side, as well as journal entries. I’m trying to figure out a way to make the journal entries go on the green side.
This is the bit that sounds odd - that would mean they’re considered a liability rather than an asset (assets should be debit - the “red side”). How is that figure populated?
The other thing to remember is if you’re looking at the chart of accounts then you’re only seeing the total of transactions within the current period, ignoring any opening balance - you have to look at the balance sheet or trial balance report to see the actual balance including any value that was there at the year start.
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