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Retail Transfers - Elimination Entries

I am curious about breweries that use the retail transfer between their main warehouse and the taproom warehouse and how they account for the elimination entries. Currently, we just transfer the inventory using the normal Inventory Transfer function but this brings the items over at cost and provides the taproom with tremendous margins while the brewery not so much because they incur most of the labor & overhead costs. We were hoping to view both the taproom and brewery as different business segments and want to get a better sense of each segments performance. I've reviewed the retail transfer function and it appears to partially provide what we are looking for however it doesn't include the elimination side of things for the sales from the brewery and ultimately the COGS side of things for the taproom when trying to consolidate. How do those that use the retail transfer account for the elimination? Is it done monthly? 

We also have taproom inventory currently but I'm thinking if I transfer all that inventory back to our main warehouse we can then just sell it back to the taproom via the retail transfer rather than have to worry about what was inventory prior to transitioning to the retail transfer function. Any additional info would be greatly appreciated. 

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    Ellen Joyner

    Stephen

    I don't know that I am doing this correctly, but here is what we do.  Our taxes are still with our accountant, and she hasn't called to say anything negative about what we are doing.

    I set up an Elimination account at the -00 Corporate Level.  So the brewery can look at a P&L and see how it is doing (knowing it sold the beer to the taproom just like it sells to any other wholesale customer), and then the Taproom incurs the COGS at the purchase price (just like it would if it were any other bar buying beer).  

    Each entity see's how it stands for profitability.  But if you run your P&L for your entire company, the Elimination accounts get picked up and you see your real picture.

    Setup a Revenue Account at the 00 division

    I setup a Level 3 Account   43000-Elimination Revenue

    and under it a Level 4 Account  43010-00 Contra Revenue

     

    Then setup a COGS Account at the 00 division

    I setup 58500 - Elimination Cogs

    and under it 58510-00 - Internal Elimination COGS.

     

    Each month I run a report of what the Taproom bought from the Brewery, and I make a journal entry for it.

    Debit 43010-00

    Credit 58510-00

    All I am doing in effect is backing out of the Company's P&L the funny money, so that I am not overstating Revenue or COGS.

    Also, post the journal entry on the 2nd to last day of the month in case I screw it up and want to reverse it. :-).

    Then Count Inventory just like you have been doing in the Taproom to consume what the taproom has gone through.  It isn't ever going to line up exactly, cause in reality, you don't deplete exactly what the taproom purchased in the month.  I keep it simple, and just eliminate exactly what the taproom purchased on a given month.

    There are other ways this can be done.  We are small, and don't have the resources for a more sophisticated method. 

    Ellen

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