Financial-Balance Sheet Part 3

Question 1

What is inventory?

Answer 1

Is all products that we have at BP, this are expensed when used/consumed/sold.

There are inventoried on the balance sheet until we used or sold on a job, then the cost is expensed on the P&L as product cost or revenue depending the case.

Question 2

Inventory - Obsolescence Policy

Answer 2

After 12 months of no movement on a particular product, 50% of the cost needs to be recognized. After 24 months of no movement on a particular product, 100% of the cost needs to be recognized.

Question 3

How often inventory is count?

Answer 3

Once a quarter.

Question 4

Inventory- Cycle counts

Answer 4

Method of physical inventory review whereby inventory is counted at regular intervals within a given time frame. Following ABC system where A chemicals are counted 4 times a year, B chemicals twice a year and C chemicals once a year.

Question 5

Inventory-Comparison of physical count vs. sub system.

Answer 5

A count of our physical inventory is compared with SAP (business system inventory).

Differences are reconciled to determine the cause.

Inventory reconciliation.

Question 6

What is Receivables?

Answer 6

Revenue that is earned, but cash is not yet collected (like monthly tickets)

Question 7

What is the importance of receivable?

Answer 7

With them we can know how much revenue we generate in a month. And see realistically how much money we are generating by month.

Example we are pumping for a client but we won’t finish the well until next month, we do a ticket up to the end of the month day, we do not charge that to the client but we can recognize month revenue with the signed ticket.