Asset Equity of Downloadable Goods

[musicbusiness]

Hi Guys, need some help with asset equity.

Some products I offer are downloads, which is obviously just one unit stored on a secure server but how many units do I place in my accounting software. So let's say for example, the product is £20 and TCOGS is £10, and I input quantity as 100 units. That brings my asset equity for this product to £1000.

Is there a way to really justify that amount of equity for a product that is online only?

Some feedback would be grateful.

 

[elaine@cheapaccounting]

I would account for the £10 as purchases (record it when it occurs) and value the stock at nil. Reason - you would have the pay the £10 whether you sell one or many items. The 'stock' has no value.

Stock is valued at the lower of cost or net realisable value (NRV) - I would argue that NRV is nil.

Happy to be corrected on this approach.

 

[musicbusiness]

Thanks Elaine. Let's say I've already recorded one transaction as per my original setup, how can I correct it for future use? If I just change the COGS now am I right in saying it won't effect the transaction made but all future transactions will be put right?

Also in your method, should I record the COGS as a journal entry, debiting and crediting the relative accounts?

 

[elaine@cheapaccounting]

what software system are you using?

 

[musicbusiness]

Intuit Quickbooks Premier 2008

 

[elaine@cheapaccounting]

Jenni is a QuickBooks expert - so I will leave her to answer the question on how to record this in the system.

 

[musicbusiness]

Thanks Elaine