Accounting Questions.

[Richard]

I would like to get a consenses of opinion, please.
1) Cores. Acct 242 or 242a?
2) Oil. Acct 244 or 242?
3) Difference. if you have to buy a part from another dealer, what do you do with te difference?
Example; part xyz is $100 from GM, but if you purchase it from a nother dealer, you pay $120. What do YOU do with the extra $20?

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[kenm]

cores 242a
oil 244 if you use bulk
parts cost overage debit 687 ( discounts) and bill as net item on ro's

[Gerry Laughlin]

Cores: 24201
oil:24400
If we pick up a parts for warranty that I can't get GM to pay we go 68000. On Customer pay the cost is changed on the ro to reflect what we actually paid, and the amount we paid is put into 24200 when the bill from the other dealer is entered. Ken would you mind expanding on how you are using 68700 for these charges? Is that CP and warranty? I am just curious.

Gerry

[imacdude]

When processing invoices we have a stamp that includes the inventory account, the freight account, and the Gross Profit adjustment account. that extra $20 would go to gross profit adjustment account.

[Chuck Hartle]

Uniform Accounting Practices say to take the extra $20 and put it to your Purchase Discount (Parity Pricing) account. I personally did what Gerry does with the customer pay parts that were purchased from outside. That is, override the cost from $100 to $120 to reflect actual purchase price.

Since I paid my parts advisors on gross profit percentage, less discounts and inventory adjustments, I wanted to make sure that we didn't expense the $20 and inflate the gross profit a pay commission on it to boot. It also helped because the parts advisors were much more reluctant to go outside to pick something up unless it was really necessary.

As for the accounts listed, just make sure that your oil is set up in a separate account and the source override or source accounting for your specific oil source is set to debit and credit your 24400 oil asset account.

Chuck Hartle'

[jazdale]

Its funny how many different opinions (some strongly defended) as the right way to do business. Here's my opinion and supporting logic.

1. Parts inventory account (GM 242) should reflect 'book value' or 'replacement cost' only. No discounts or premiums should be included in this value.

1a. when coding incoming invoices with a premium, it should look something like this
242 (inv) 1.00
687 (adj) .20
300 (a/p) 1.20-

1b. Similarly, a discount should look the same. Consider a sub-account of 687 to track premiums and discounts - instead of a net value.
242 1.00
687a .20-
300 .80-

What I don't care for in doing this, is that the inv adjustment (687) assumes the profit/loss in this month. As Chuck says, it can also inflate 'gross-based' commissions unless you take 687 into your calculations.

I am against on-the-fly overrides to cost when posting to an RO. It just seems to me that the inventory value in accounting can get skewed if we all don't sing from the same hymm book (book cost only in acct inventory). The only exception to this is non-franchised parts like Ford parts in a GM body shop.

Cores and oil - Unless you have a significant amount worth tracking separately, I wouldn't mess with a break-out account like 242a or 244. As long as oil is in it's own parts source, it can be managed.

I'm open to your opinions confirming or contradicting my view.

Dale

[Gerry Laughlin]

If a part has a cost of $100. and a list of $167. and you were to pick it up from another dealer you would probably pay $125.00. If you put the pickup amount of $25.00 in 68700 and use the dealer cost as cost on the repair order that means service gets $33.50 for selling the part and parts gets $33.50 minus $25.00 or $8.50 profit. Doesn't seem quite right to me when my parts department paid the drivers salary, the truck payment and the gas to go pick up the part.

Gerry

[jazdale]

Gerry,

I agree totally with your reply if that's exactly how we based our income statement.

Maybe that's one of the reasons (albeit a weak reason) for the gross parts transfer.

Just to play devil's advocate........

Virtually 100% of the parts purchased in this fashion are for the service department. Its tough to decide whether this is a sign of a parts department doing 'whatever it takes' to give good service to the customer or a 'penalty' for not having the parts in stock in the first place.

Geez, the more you think about it, the muddier the water gets.

Dale

[Gerry Laughlin]

Dale,
Today I have picked up a handle for an Alero (I am chevy) and a center armrest for an Impala. Neither of these are parts that I would stock, but I obtained them to keep the customer happy. So I have a hard time with the penalty thing. I must be a little thick headed today but I am not catching your drift on the parts transfer and income statement.

Gerry

[jazdale]

Gerry,

Explanation of my 'drift'

If you worked at Dale Motors, the service department would report the the gross from labor sales, and the parts department would report the gross from parts sold on the RO.

Since the premium paid for getting the part from down-the-road motors is a cost to parts, it doesn't matter where it shows up, the bottom line is still the same for the parts department. Using your example, the whole 33.50 becomes parts profit.

For whatever reason(s) the manufacturer implemented the gross parts transfer, a portion of parts gross became service gross. But the expenses in acquiring these parts did not. I'm not sure, but I don't believe the 687 account is part of the gross transfer. A point that totally confirms your first post on only making 8.50 while the service dept gets 25.00.

Additionally, many commission schemes are not factoring in these costs.

I guess my point is - since the manufacturer is forcing creative accounting on you, then you are forced to do your own version of creative accounting to show a profit.

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Your example of the Alero handle.
Totally throws my penalty statement out the window (no pun intended).
But, of course - if we didn't give a portion of parts gross to the service dept, we wouldn't have this dicussion in the first place.

Thanks for your insight

Dale