sql-ledger-users

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

[Oscar A. V. <ov...@en...>]

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?

If I am right (i.e., I can't do what I want), I'd appreciate suggestions
on how to account for my fuel inventory and my energy sales.

Thanks in advance.
--=20
Oscar A. Valdez
Energ=EDa Borealis Ltda. de C.V.

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

[Dieter S. <dsi...@sq...>]

You have to set up heat as an assembly and add fuel as a component so it
will be recognized as COGS when you sell heat.

-- 
Dieter Simader       http://www.sql-ledger.com   Tel: (780) 472-8161
DWS Systems Inc.        Accounting Software      Fax: (780) 478-5281
============== On a clear disk you can seek forever ================

On Thu, 9 Nov 2006, 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?
>
> If I am right (i.e., I can't do what I want), I'd appreciate suggestions
> on how to account for my fuel inventory and my energy sales.
>
> Thanks in advance.
>

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

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

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.
Overhead (consumables, labor, etc.) OTOH, is an operating expense that
should be treated as expended as soon as it is received/paid for.  Its
usage impacts profit and detracts from income revenues.  It goes to AP
then gets paid from income. 


> If I am right (i.e., I can't do what I want), I'd appreciate suggestions
> on how to account for my fuel inventory and my energy sales.
> 
> Thanks in advance.

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

[Oscar A. V. <ov...@en...>]

El jue, 09-11-2006 a las 21:49 -0600, Jeff Vian escribi=F3:
> 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 in=
to
> > electrical and heat energy for sale.
> >=20
> > 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 produ=
ce
> > energy for immediate sale (can't be inventoried). That would seem lik=
e a
> > Job Costing or WIP functionality that doesn't seem to be there in
> > SQL-Ledger.
> >=20
> > Am I wrong?
> >=20
> Just a thought from a layman. IANAA
>=20
> 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.
>=20
> 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.
--=20
Oscar A. Valdez
Energ=EDa Borealis Ltda. de C.V.

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 escribi=C3=B3:
> > 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.
> > >=20
> > > I've looked at the manual's section on Inventory, and it doesn't se=
em
> > > like I can have a fuel inventory and periodically consume it to pro=
duce
> > > energy for immediate sale (can't be inventoried). That would seem l=
ike a
> > > Job Costing or WIP functionality that doesn't seem to be there in
> > > SQL-Ledger.
> > >=20
> > > Am I wrong?
> > >=20
> > Just a thought from a layman. IANAA
> >=20
> > 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 producti=
on
> > of energy.  It should not be treated as inventory for this purpose.
> >=20
> > Energy can be treated as a service, since it is not tangible inventor=
y.
> > It can be sold by the unit, similar to service hours, and cannot be
> > stored. Invoicing goes to AR.
>=20
> 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.

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.

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

[Michael H. <mh...@it...>]

Speaking to this a little further, some of our products are =20
"whiteboxes", which are PCs assembled by us from components purchased =20=

wholesale.  Our assemblies include a line item for the typical total =20
shipping cost of the components and also a figure for the calculated =20
labor cost of purchasing, assembling, etc.  In this case of course =20
we're going the other direction, taking an intangible and making it =20
part of a tangible.
     The problem I could see with flipping it around for your =20
scenario is that you may end up in a cycle of constantly adjusting =20
the figure to match reality since your production rate will never be =20
perfectly even so no matter what conversion factor you decide to use =20
you'll always be a few MW (or more!) high or low at the end of a =20
billing cycle.  That said, I'm not sure that's really something that =20
can be handled by any accounting system except those specifically =20
designed for the power generating industry and those tend to run into =20=

the hundreds of thousands of dollars!
    If you're in the United States though there is a group called =20
EPRI, (Electric Power Research Institute), which you may even be a =20
member of already, who probably won't have the answer specifically =20
but could probably point you in the right direction to see what your =20
accounting options are.  Even if you're not in the US they might =20
still be able to help as they operate globally.  Their website is:
	http://www.epri.com/


Thanks,

Michael


On Nov 10, 2006, at 5:03 AM, Jeff Vian wrote:

> 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 escribi=F3:
>>> On Thu, 2006-11-09 at 09:00 -0600, Oscar A. Valdez wrote:
>>>> We are a small power generator that purchases fuel and converts =20
>>>> it into
>>>> electrical and heat energy for sale.
>>>>
>>>> I've looked at the manual's section on Inventory, and it doesn't =20=

>>>> seem
>>>> like I can have a fuel inventory and periodically consume it to =20
>>>> produce
>>>> energy for immediate sale (can't be inventoried). That would =20
>>>> 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 =20
>>> have
>>> some quantity on hand, but it is consumed as overhead in the =20
>>> 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 =20
>>> 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 =20
>> 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 =20=

> 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 =20=

> the
> energy you sell.
>
>
> ----------------------------------------------------------------------=20=

> ---
> Using Tomcat but need to do more? Need to support web services, =20
> security?
> Get stuff done quickly with pre-integrated technology to make your =20
> job easier
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Re: [SL] Accounting for fuel inventory in a small power generator

[Paul T. <pt...@wa...>]

Michael Hasse schreef:
> Speaking to this a little further, some of our products are  
> "whiteboxes", which are PCs assembled by us from components purchased  
> wholesale.  Our assemblies include a line item for the typical total  
> shipping cost of the components and also a figure for the calculated  
> labor cost of purchasing, assembling, etc.  In this case of course  
> we're going the other direction, taking an intangible and making it  
> part of a tangible.
>   
In those circumstances I strongly suggest you use a service item for the 
services and an inventory item for the goods.
An assembly of goods and services should then give correct figures for 
hardware (inventory) and COGS one way.
And as a bonus, revenue for services the other way..

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

[Michael H. <mh...@it...>]

I guess that wasn't very clear, was it?  :)  The service items for  
our whiteboxes are indeed service.
    The power generating problem is a bit tougher though because  
while service items are "soft", inventory items are not.  So if one  
of my guys spends an extra fifteen minutes building a machine we can  
just absorb it and inventory is not affected.
    In the power generation case though the equation goes the other  
way, if one of his generators gets a leaky exhaust valve or something  
and nobody notices for awhile, it will subtly skew the output-power/ 
fuel ratio and he'll have burned more fuel per megawatt than usual  
which is a lot harder to "absorb" as he's paying actual money for  
that.  He'll have to either constantly tweak the ratio in his billing  
or have a periodic adjustment entry, (which I guess is not so  
different from our update "invoices" when we take inventory and have  
to account for the misc cables and things that were never actually  
billed).


Thanks,

Michael


On Jan 26, 2007, at 9:03 AM, Paul Tammes wrote:

> Michael Hasse schreef:
>> Speaking to this a little further, some of our products are
>> "whiteboxes", which are PCs assembled by us from components purchased
>> wholesale.  Our assemblies include a line item for the typical total
>> shipping cost of the components and also a figure for the calculated
>> labor cost of purchasing, assembling, etc.  In this case of course
>> we're going the other direction, taking an intangible and making it
>> part of a tangible.
>>
> In those circumstances I strongly suggest you use a service item  
> for the
> services and an inventory item for the goods.
> An assembly of goods and services should then give correct figures for
> hardware (inventory) and COGS one way.
> And as a bonus, revenue for services the other way..
>
>
> ---------------------------------------------------------------------- 
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