Should a company whose primary sales are in oil put flashlights in as an inventory item when they are one-time

Question

Our company sells oil products, but made a purchase of 650 flashlights to give away or sell at a very low price for the holidays. Should these flashlights be included as an inventory item? I think they should be listed separately as an accessory.

Answer 1

Since they were purchased as a "Give Away" I would put it under Promotion or Advertising expense.

Me

Answer 2

In any case they are an asset, until "sold" or given away. Any that are given gratis will become a shortage.
In order to prevent an increase of shortage, those items should be transferred out of inventory to an advertising account.

In either case, it does not affect the bottom line, whether it becomes an expense or shortage. It will, however, be reflected in the advertising budget and therefore not distort the shortage. Shortage usually reflects theft, book errors, or unknowns.

Any that are sold will merely be a sale of inventory.

As far as inventory classification, this is a matter of choice. "Accessories" will be a sub-class of inventory, and will no doubt be entered there, or other class, other than oil related products.

If you are familiar with inventory sub-classes, you should know that there may be many subs in your business in order for unit control, sales analysis, and planning.

Answer 3

You can put them anyway you like. It is called creative accounting. Just don't get too smart for your own good! "Vaulting ambition overleaping itself" - Shakespeare.