NESFA^® Treasury Procedures: Accumulating Book Production Expenses

Due to peculiarities of Peachtree and the fact that NESFA is on a cash accounting basis, we have to jump through some oddly-shaped hoops to properly make the cost of producing a book an inventory asset.  This is the procedure:

When a book is started, create an asset account for the book.  We have about a hundred asset accounts (named AS-Book001 through AS-Book099) which can be and were re-used for that purpose.  Nowadays, we do not reuse them.  Pick one which is currently unused, or create a new one, and name it to reflect the book you will be accumulating expenses for.

As expenses come in and checks are written, use the AS-Booknnn account to accumulate all the book expenses (but NOT advances against expenses).  As the book moves to completion, all of the expenses incurred will be included in this account. 

Any royalty advance paid to an author, however, is NOT counted as an expense of the book.  When the advance is paid, the author's royalty account is debited.  Royalties are only considered an expense of the book when the number of copies is known, at which point royalties are credited to the author's royalty account and debited to the book production account.  This has the virtue of causing the author's royalty account to reflect the amount the author is now actually owed.  when we pay royalties on publication, the royalties paid are also put in this account via a general journal entry which puts the computed royalty amount in RY-author, and AS-Booknnn.

Once all of the expenses are in, and we know the number of copies printed, we buy the book into inventory with a single transaction where we record a purchase where we spend the total value of the AS-Booknnn account to buy however many books were actually printed.  This transfers the cost of publishing the book from the AS-Booknnn account to the IV-book account.  At the end of  this the AS-Booknnn account should have a zero balance.

It is highly desirable to buy the book into inventory as early as possible.  This should not be delayed more than necessary and should happen as soon as the final printing and shipping bill arrives (which also includes the exact number of books printed.)

Sometimes it turns out that some smallish expenses are not turned in in a timely fashion.  You have two choices:

• Ignore them and treat them as SE-book expenses when they come in.
• Estimate them by buying in the book for more than is currently in the AS-Booknnn account.  When the expense actually comes in (a late expense report, perhaps) this will bring the AS-Booknnn account to zero. If the amount was estimated incorrectly, do one further transaction to zero the AS-Booknnn account out against the SE-book account.