SETTING UP PARTS:
Parts are entered using Add Sales
Parts.
Generally the supplier's product number is used as YOUR product
number, unless the part number is too long. Management should set a
policy on how part numbers should be entered to ensure uniformity
and prevent duplication of product numbers.
When parts are setup, they are generally entered with a separate
Product Class for each main supplier.
This is done using option Sales Product
Classes - arrange the main suppliers in alphabetical order. See
example:
Product Class Supplier ------------- -------- 800 BOMAG 820 BOSCH 850 HILTI 900 KANGO 945 SULLAIR 990 MISC SUPPLIERSArranging your parts inventory in this manner has several advantages:
Selection of G/L Accounts If Your Firm Maintains a Parts Inventory
In Sales Product Classes the General Ledger Accounts selected would be:
G/L Acct Account Description -------- ------------------- COST OF GOODS SOLD 4510 COST OF PARTS SOLD REVENUE ACCOUNT 4195 PARTS SALES INVENTORY ACCOUNT 1260 PARTS INVENTORYThe General Ledger posting of sales items is controlled by the G/L Account numbers assigned to the Product Class.
PARTS PURCHASES:
Example: INVENTORY ITEM: Filter SELLING PRICE: $10.00 COST: $ 6.00When a part is purchased in Accounts Payable, the part adds to your inventory assets.
Parts Inventory is DEBITED Acct# 1260 for $ 6.00
Accounts Payable is CREDITED Acct# 2000 for $ 6.00
PARTS SALES:
When a part is sold on a Work Order Invoice (using Work Orders), the sale revenue and the parts
expense are recorded in the General Ledger.
The Net Profit equals $4.00, which is $10.00 revenue less $6.00
cost.
Sales Revenue is CREDITED Acct# 4195 for $10.00
Accounts Receivable is DEBITED Acct# 1200 for $10.00
Parts Inventory is CREDITED Acct# 1260 for $ 6.00
Cost of Parts Sold is DEBITED Acct# 4510 for $ 6.00
REPAIRS:
A part can be used for a repair on a Work
Order and when the W.O. is completed using Close Internal Work Order the part is expensed to
the G/L Account assigned to the Repair Charge code selected when
entering the repair.
Generally, the G/L Account is either Repair & Maintenance
Expense or Equipment Warranty expense.
The posting would be:
Parts Inventory is CREDITED Acct# 1260 for $ 6.00
Repair Charge Code Acct is DEBITED Acct# 4810 for $ 6.00 *
* = Repair Expense Acct
ADDITIONS:
Additions occur when the repair costs are added to the value of the
equipment being repaired.
For example, when completing an engine overhaul to a traded-in
Bobcat, the costs can be capitalized to add the value of the repair
to the Bobcat.
This is done by setting up the Bobcat on an internal Work Order
using Work Orders then finishing the work
order with Close Internal Work Order.
When the next Daily Close is run, the G/L posting for parts would
be:
Parts Inventory is CREDITED Acct# 1260 for $ 6.00
Rental Equipment Inventory is DEBITED Acct# 1300 for $ 6.00 *
* = Bobcat Asset Acct
And the Fixed Asset Tag for the Bobcat would increase by the value of the repair.
ONE-TIME PARTS PURCHASES:
Sometimes a part is purchased for one-time use only.
Even though your firm is maintaining a parts inventory, it may not
seem worthwhile to setup this item.
In this special case, use the Miscellaneous Part as a substitution.
Refer to Miscellaneous Part - Setup for
a discussion on how to setup and use the Miscellaneous Part.
However, we caution against using the Miscellaneous Part, since it can lead to accounting errors between the Accounts Payable department and the Parts Department - with Accounts Payable coding the purchase to a G/L Account for Parts Inventory and the Parts Department expecting the purchase to be expensed to a G/L Account for Repairs and Maintenance.
If your firm uses the Purchase Order programs for parts
purchases, this error can be eliminated since the Miscellaneous
Parts and regular parts would be clearly distinguished.
If Warehouse or Item Receiving was completed when entering the A/P
Invoice, the software would select the correct G/L Accounts
automatically.
Caution when using the Miscellaneous Part:
The shop staff should check that the real part number is not setup
on the software before using the Miscellaneous Part number.
If staff use the Miscellaneous Part when the real number exists,
then the inventory quantities will be incorrect.
Often the part number will exist, but the staff does not find it because the dashes or spaces used in the part number sequence may make the product number slightly different than product number tried by staff, i.e. part # 30-890990 is not the same as 30890990.
Management should set a policy on how part numbers should be entered to ensure uniformity and prevent duplication of product numbers. It will also reduce the use of the Miscellaneous Part.
Work Order & Repair programs can still be used, even if your
firm does not maintain a parts inventory.
This is done using the Miscellaneous Part as a substitution for all
parts. Refer to Miscellaneous Part -
Setup for details.
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