Re: [SL] Accounting for fuel inventory in a small power generator

[Jeff V. <jv...@ch...>]

On Thu, 2006-11-09 at 22:12 -0600, Oscar A. Valdez wrote:
> El jue, 09-11-2006 a las 21:49 -0600, Jeff Vian escribió:
> > On Thu, 2006-11-09 at 09:00 -0600, Oscar A. Valdez wrote:
> > > We are a small power generator that purchases fuel and converts it into
> > > electrical and heat energy for sale.
> > > 
> > > I've looked at the manual's section on Inventory, and it doesn't seem
> > > like I can have a fuel inventory and periodically consume it to produce
> > > energy for immediate sale (can't be inventoried). That would seem like a
> > > Job Costing or WIP functionality that doesn't seem to be there in
> > > SQL-Ledger.
> > > 
> > > Am I wrong?
> > > 
> > Just a thought from a layman. IANAA
> > 
> > Fuel used in operations is an expense item.  You may buy it, and have
> > some quantity on hand, but it is consumed as overhead in the production
> > of energy.  It should not be treated as inventory for this purpose.
> > 
> > Energy can be treated as a service, since it is not tangible inventory.
> > It can be sold by the unit, similar to service hours, and cannot be
> > stored. Invoicing goes to AR.
> 
> But what we do is transform fuel into electricity and heat. It's an
> industrial transformation. So fuel is our raw material, and electricity
> and heat our end products.

Deiter made the comment that it can be used as part of an assembly,
which would be the units of energy produced and sold.  As such, you buy
it, it goes into inventory, and as you sell the energy/heat it gets
consumed and the cost becomes part of the COGS.

I have a slight problem with that in that energy is not physical  and
cannot be stocked even though the fuel is physical.  However, the
concept seems proper. Cost of fuel is part of the cost of producing the
energy you sell.