Adjustment for Inventory Expense

Effect on Balance sheet
DR CR
Retained Earnings (-) Inventory (-)

During the reporting period half of the promotional materials have been used, distributed to potential clients. The usage of that inventory has to be accounted for, so to show its reduced value, which means a reduction in assets.
Old record: 30000
Current record:

    %
In this example, half of all promotional materials, already received and paid (TT10 and TT11) have been used for promotional activities.





Original values

Balance Sheet Original

ASSETS
Current Assets 767850
Bank 758550
Debtors and Prepayments 9300
Other Current Assets (Stock) 0
Fixed Assets 44000
TOTAL Assets 811850
LIABILITIES
Current Liabilities 44300
Creditors 44000
Accruals 300
Long Term Liabilities 0
Long Term Loan 0
Ending Equity 767550
Shareholders' Equity 800000
Income Statement -32450
TOTAL Liabilities + Equity + Retained Earnings 811850
A. Income
Sale of Licences 0
Software Maintenance after Warranty, Recurrent Licencing Fees, Ongoing Technical Support 0
Unearned income 0
Currency Gains 0
Cost of Goods Sold (Purchase of Licences for Resale) 0
TOTAL INCOME: 0
B. Expenses
Software Upgrading 10000
Web Site Development 2500
Web Maintenance 4000
Technical Support 0
Marketing 0
Staff Salaries 8000
Consultancy and Accountancy 0
Office Costs 3600
General Costs 4350
Inventory Expense 0
Interest on loan 0
Currency Losses 0
TOTAL EXPENDITURE: 32450
Profit (Loss) from Operations
Corporate Tax 0
Dividends Paid 0
Net Profit (Loss): -32450
After changes

Balance Sheet New

ASSETS
Current Assets
Bank
Debtors and Prepayments
Other Current Assets (Stock)
Fixed Assets
TOTAL Assets
LIABILITIES
Current Liabilities
Creditors
Accruals
Long Term Liabilities
Long Term Loan
Ending Equity
Shareholders' Equity
Income Statement
TOTAL Liabilities + Equity + Retained Earnings
A. Income
Sale of Licences
Software Maintenance after Warranty, Recurrent Licencing Fees, Ongoing Technical Support
Unearned income
Currency Gains
Cost of Goods Sold (Purchase of Licences for Resale)
TOTAL INCOME:
B. Expenses
Software Upgrading
Web Site Development
Web Maintenance
Technical Support
Marketing
Staff Salaries
Consultancy and Accountancy
Office Costs
General Costs
Inventory Expense
Interest on loan
Currency Losses
TOTAL EXPENDITURE:
Profit (Loss) from Operations
Corporate Tax
Dividends Paid
Net Profit (Loss):
Operating the Firm