Accounting For Beer, Liquor and Wine Sales

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Background

In Manitoba, if you are a licensed establishment and can sell Beer, Liquor and Wine .. you need to account for the purchases in the accounting records. It can be difficult, because most of the time (I believe), the Manitoba Liquor Control Commission (MLCC) holds on to preauthorized blank cheques .. the hotel or establishment just places an order, and a cheque is issued, or automatically debited out of the company’s bank account. There are usually invoices emailed to the business and just packing slips included with the shipments.

In Manitoba, Vendors selling Beer have a special price. The price is preset, plus GST and plus GST .. and then a refundable bottle deposit price is added. Individuals can return the empty beer bottles and receive that bottle deposit back. Beer drinkers do not just have to bring back the bottles purchased at one particular establishment, they can return it to any vendor that will accept returns. Usually, the MLCC (I believe) pays these vendors an extra 2 cents per bottle as a handling fee. Believe me .. it can start to get quite complicated – especially if you are “in tune” with what is really happening and monitoring your gross profit percentages.

For instance, FORTUNATELY for us beer drinkers .. it’s pretty standardized in Manitoba. I can go to pretty much ANY beer vendor and buy a case of beer for the same price as I would at any other vendor. Usually, the gross profit is about 15% and vendor owners count on volume. However, if I want to drink a glass of beer at a bar or lounge, as you might be aware, the price can range greatly depending on the popularity of the bar, or if it’s happy hour, or even if it’s draught (draft) beer or depending on the brand even. Gross profit can range from between 55% and 70% depending on the discretionery prices that the owners may implement.

Recording Sales Of Beer and Liquor and Wine

Liquor and Wine sales are easy. In the daily cash sheets, there should be separate figures already segregated in the cash register tapes (or should be) and the amounts are to be recorded in the general ledger (G/L). I like to keep separate G/L accounts for every type of income, because you really can have a gazillion accounts in computer generated systems. Sure, I might group and combine them all into one or just a few accounts on the company’s final year end financial statements .. but I like to see the detail in the computerized G/L. For most of my clients, it is probably split 50/50 with regards to taxes. Some systems separate the sales figures and the GST and PST figures. Other systems just keep track of the total sales, including taxes and must be segregated out. The formula would be:

[Liquor & Wine Sales w/Tax] divided by 1.13 = gross sale w/o tax then difference 6% GST 7% PST

For beer sales, the above would be true for lounges and bars .. but for Vendors you have to make an adjustment. I would recommend actually calculating the figures if you can – at least once – to make a “proof” – if you are estimating amounts. For instance, I performed one test audit on 3 separate months in a 1-year period to estimate the amount of beer bottle deposit that was included in the Combined Vendor Beer Sales, w/Tax and Bottle Deposit. In my case, figures came between 6% and 11% of the tax included price, and on average worked out to be an average of 7.5% as the discount calculation to cover the cost of beer bottle refunds included. The formula would be:

[Beer Bottle Sales w/Tax w/Bottle deposit] times 92.5% = gross salew w/Tax
[[Beer Bottle Sales w/Tax] divided by 1.13 = gross sale w/o tax then difference 6% GST 7% PST

Sometimes I keep the bottle deposit amounts included in vendor sales and other times I credit the cost of sales, where I keep the container deposit purchases and empties together in one account.

Recording Purchases of Beer, Liquor and Wine Sales

Well .. as I mentioned above .. thank goodness the MLCC provides a monthly recap because in some cases it can be quite confusing trying to get all the information handy. They do provide a monthly statement that shows a recap of every transaction and I always recommend double checking every invoice to the statement – like you should with every other business you deal with.

Here’s how I do it. When I reconcile the bank (or input cheque stubs) .. I always post the payments to the MLCC into a “clearing account” (let’s say account 5500). Then I recap the MLCC Summary Recap into a Journal Entry!

I have replicated my journal entry below, in case you wanted to copy it yourself into your own excel spreadsheet.

In theory, the MLCC Clearing account should clear after the journal entry, but it is quite common that it doesn’t because usually the company doesn’t really know if cheques were issued (sometimes) until they clear the bank. However, they might be included on the monthly statement. What I do, is that I will always make a reversing journal entry (Code “98” in my program) to clear the MLCC Clearing account to the Accounts Payable-MLCC account on the Balance Sheet.

And if that does not make sense – this journal entry will probably not make sense either. Sorry!

Here’s That Journal Entry to Summarize The MLCC-Recap!

JOURNAL ENTRY

DEBIT

CREDIT

 
DR. A/P-MLCC (Last Month)

XXXXXX

 
  CR. A/P-MLCC (Current Balance)  

XXXXXX

DR. I/S-Beer

XXXXXX

 
DR. I/S-Spirits (Liquor)

XXXXXX

 
DR. I/S-Wine

XXXXXX

 
DR. I/S-Refreshment Beverages

XXXXXX

 
DR. I/S-Delivery (Wett/BDL/Mlcc)

XXXXXX

 
DR. I/S-Order Processing FEES

XXXXXX

 
DR. I/S-Supplementary Fees

XXXXXX

 
DR. I/S-Assembly Fees

XXXXXX

 
DR. I/S-M.H.A. Dues

XXXXXX

 
DR. GST ITC (Taxes)

XXXXXX

 
DR. I/S-Container Deposit-Purchases

XXXXXX

 
  CR. I/S-Container Deposit Empties  

XXXXXX

  CR. Handling Credits  

XXXXXX

  CR. Beer Discounts  

XXXXXX

 
  DIFFERENCE-MLCC CLEARING  

YYYYYY

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