# How to calculate

Dear Friends,

I am a Orchid Member. We providing Software Solutions to
Jeweler. Can anybody help me. I have one query basically it is
account related,

Suppose a Customer gives me old gold ( 10 gms ) in lieu of this
he purchases new gold item of 15 gms. Then How I should show this
transaction?

I know that it may be a silly question but I am not getting how

Gopal Mahajan
Director,
GiSmo Software Solutions,
Near Dhyan Mandir,
Off. Incom Tax Office,
Prabhat Rd. Lane No. 14
Pune-411004, ( MS) India.
Te ( R ) : +91-20-341681
Te ( W ) : +91-20-231587

``````  Suppose a Customer gives me old gold ( 10 gms ) in lieu of
this he purchases new gold item of 15 gms. Then How I should
show this transaction?
``````

Gopal, The old gold can be written as a credit to the customers
account or as a down payment toward the purchase of the new item
to be subtracted from the bottom line of their bill for the new
item. The old gold becomes part of your inventory and is
accounted for as any other purchase of stock or inventory. Hope
this solves your problem, Steve Howard

What would the value be of five grams of gold be to you and that
could be applied against the value of the work done. Ron

Hi Gopal, We buy scrap gold and we treat it as a seperate
transaction on payout. Hope this helps. Michael B

Hi Steve,

Thanks ! Yah,u r right I think there are two ways.

• 1st- If the customer comes with old item and he likes any
existing item then we can purchase the old item and Sell the new

• 2nd- If the customer comes with old item and he wants to make
a new item then we will receive the old item for " Material

Thansk alot agian.

Gopal Mahajan
Director,
GiSmo Software Solutions,
Near Dhyan Mandir,
Off. Incom Tax Office,
Prabhat Rd. Lane No. 14
Pune-411004, ( MS) India.
Te ( R ) : +91-20-341681
Te ( W ) : +91-20-231587

You could post the sale of 15gm gold (sales-gold) against the
value of the old 10gm towards inventory and the balance due
against accounts receivable or cash when you receive the money.
The details of the posting will vary depending on the sequence
of events, if you’re doing cash or accural accounting etc. But
the final change in you books would be an increase in sales
balanced against an increase in inventory value plus cash.

If you typically receive the old gold before making the sale you
could treat this as possessing someone else’s property or you
could post it into your books against inventory and a sales
credit.

Tom Kruskal

Suppose a Customer gives me old gold ( 10 gms ) in lieu of this
he purchases new gold item of 15 gms. Then How I should show this
transaction?

Hi – I haven’t done inventory accounting in awhile (did bank
accounting for nearly 20 years & it’s a world of difference), but
I think you really have two transactions theRe:

1.) dr gold supply inventory cr sales contra
or good will account to recognize the increase in your gold
inventory

1. ``````               dr  sales contra account or good will
``````

account cr merchandise or inventory account to recognize the
sale of merchandise to a customer

The first transaction would be equal to whatever value you
assign to the 10 grams of old gold, and reflects an increase in
your gold supply inventory. The value here would be the result
of calculating 10 x whatever your per gram price for buying gold
is from customers. The second transaction reduces the amount of
inventory that you hold for sales to customers by whatever value
you have assigned to the item to be sold; the debit and credit
amounts recorded in this second transaction should reflect the
sales price that would have been recorded if it were a cash
transaction. Use of a contra or ‘good will’ account recognizes
the fact that sometimes these transactions bring in profits and
sometimes they bring in ‘good will’ and gives you the opportunity
to track where you stand financially on these over time.

``Laura.``

Hi,

Basically I am in India. And there are Different different Sale
Tax & Excise Duty on Different Item. E.g. On Raw gold the Tax is
Low as compare to the Diamond or Ornaments. Basically These two
taxes was creating a main problem. But Now I understood where I
was making a mistake.