>Hey Ken! How are you?
>
Hi David, we are good and up to our necks with our new POS stuff. Lots of interest, two installations this month.

>
>Here's my understanding:
>First, I'd have to say that it's their decision. That said, I BELIEVE that the proper accounting thing to do is to allocate any expense associated with the creation of inventory to that inventory - so yes, if freight and other expenses help in creating product, they can be considered product costs.
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>HOWEVER (and this is a big however), product costs do not necessarily equate to COGS (cost of goods sold). In fact, I pulled out my b-school accounting book (which, since my primary system is an accounting system, I keep very handy), which says:
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>"....product costs are initially assigned to inventory; they are reclassifed as expenses when the products are sold and the revenues they create are recognized...." (Shillinglaw and McGahran, 1993)
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>So it sounds to me like if you make that change, you also need to make a corresponding change to the sales system, to reallocate those costs as expenses once a sale is made.
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>Finally, my policy on this stuff is to always check with a CPA first. I personally consult with my accountant on some of these issues.
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>I'm purposely wishy-washy, because I don't know for sure, but that is my best guess.
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>Perhaps someone with more definitive knowledge will also respond.
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>Good luck,
>
>David
>
OK Thanks for the input!

Ken