How do you track and invoice for inventory items that you've rented out but not yet sold? I sell furniture which I record as inventory. Sometimes I rent this furniture for several months, while keeping the asset on the balance sheet and just recording rental income. After the rental period is over I may sell this item. How do I record this transaction from start to finish?
You say that you MAY sell the rental furniture after it has been rentaed for a few months. Before I can provide any suggestions I would need to know what do you do with it if you don't sell it? Also, are your rental agreements, Rent-To-Buy agreements?
I have the same scenario as the question above. All inventory (sound equipment) is rented until there is no book value left at which time it is sold. Will take years. How do I rent it and keep it in inventory at the same time?
in it's simpliest form -----------
assuming that your accountant writes down your inventory [based on estimated life or other such variable] on a monthly or yearly basis, the entries would look something like this:
(for the monthly rental amount) cr ... rental income; dr ... cash in bank
(the accountant's entry) cr ... inventory (cost); dr ... inventory write-down
(for the sale) cr ... sale; dr ... cash in bank
dr ... cogs; cr ... inventory (for remainder, if any, of cost)
re: previous post
'inventory write-down' would be a 'cost-of-goods-sold' type account. 
Hi all,
I have a bookish question, maybe unrelated to the original question as the original question's intent seems to be how to keep this under Inventory...
Anyway, my bookish question is : Shouldn't the items be classified as Equipment, instead of Inventory ? Inventories are meant for sale; Equipments are meant to be used for the main operations - which is the rental operations. Over the years, they are depreciated; when sold, gain/loss recognized as other income out of proceeds from sale.
Yanar,
I would tend to agree with you. If the original intent was to rent out the equipment and then one later decides to sell it, this would lend one to think the equipment was capital assets and should be depreciated and then gain/loss recognized upon sale. I would think it would be based upon intent at the time of putting the asset(s) into use.
Also one might consider what the car rental co's do, as this would probably be a similar tactic.
thanks!
good to know my thinking process is correct ... or at least someone else thinks it's correct. :)
