Managing Inventory and Other Assets
In This Chapter
Recording the buying and selling of widgets, lingerie, haggis and much more
Doing a head count of what’s in stock
Balancing up your inventory account
Buying and selling motor vehicles, new equipment and other assets
Calculating depreciation and keeping tabs on asset values
Finbar, my 10-year-old son, was looking over my shoulder as I was writing this chapter. ‘What’s depreciation?’ he asked curiously, reading my detailed explanations about assets and asset values, and different ways to calculate depreciation. ‘It’s when something gets old’, I replied somewhat distractedly, ‘and it isn’t worth so much anymore. Depreciation is how you account for the decline in value of something.’
‘Hmm’, replied Finbar. ‘Does that mean you’re depreciating?’ ‘No’ came my terse response. ‘I don’t depreciate. I appreciate, meaning I’m more valuable and more beautiful with every year that passes.’ ‘No need to be so sensitive’, he shrugged. ‘Doesn’t sound like you’re appreciating much at the moment.’
I do appreciate that getting your head around asset valuations and depreciation is tricky, and that’s why I devote over half this chapter to that very topic. I also flesh out a subject that gives many novice bookkeepers grief, namely how to account for the buying and selling of inventory, how to manage stocktakes, and how to get your inventory account to balance.
Buying In, Stocking Up and Selling Out
You can account for inventory in two different ...