Comment by renewiltord
2 years ago
Do you actually do that? When people are working late at the office and you order pizzas you put that into your inventory and then remove it as people consume the pizzas? I record that into a separate operating expenses account meant for this kind of fringe benefit, not into inventory.
Pretty small so I do the accounting as well, but I think I'd lose my mind if I had to record them into inventory. Then when they leave half the pizzas for the next day, I record that? No way.
> Do you actually do that?
No, nobody does this. GP is engaging in an exercise in pedantry, under the guise that it serves some pedagogical purpose. Personally, I don't think it's particularly useful to teach people about how things could theoretically be done, when it's much easier to show then how things actually are, but I'm sure there is some accountant nerd out there who is extremely meticulously tracking the total value of the gumballs on the secretary's desk as they are consumed.
you don't need to record the halves, nothing stops your pizza order to be automatically recordered as
-A_cash +A_inventory
-A_inventory + L_expenses
Sure, if your pizza is frozen and consumed in another period, your books will not reflect reality, but so what, when talking about the very basics of accounting you offset that misrepresentation of a simple example by gaining an important pedagogic benefit! Which one, though? What do you gain by denying that pizza is an asset, going so far as calling recognition of an asset as an asset a fraud (but only in extreme cases of 5 pizzas!) and bringing depreciation/core business in?
Perhaps this is obvious to you, but I don't see what I'm gaining by doing this. My inventory management system will have different things unless I'm also recording these pizzas in there for the day. And it will show my inventory valuation as fluctuating when I do things like lunch or dinner for the team. It really seems useless to me when running the business.
That's fine, many accounting practices eschew precision for simplicity, you don't mark-to-market everything, depreciation is linear, etc, so if you don't see any value in this, but only troubles with integration with other systems etc, then it's useless to you. But then the article wasn't about running a real business