How to Record Evaluation Board (EVB) Sales and Costs
Accounting for the sale of hardware development kits used to win 'Design-ins' with customers, often sold at or below manufacturing cost.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Cash / Accounts Receivable | Asset (+) | 199.00 | - |
| Cost of Goods Sold - EVB Kits | Expense (+) | 450.00 | - |
| Revenue - Hardware Sales (EVB) | Revenue (+) | - | 199.00 |
| Inventory - Finished Goods (EVBs) | Asset (-) | - | 450.00 |
💡 Accountant's Note
To get a chip into a new smartphone or car, the manufacturer sells 'Evaluation Boards' (EVBs). These kits are expensive to build but sold cheap to lower the barrier to entry. The $251 loss is recognized immediately as a cost of doing business. You cannot capitalize this loss as 'Marketing' because the EVB is a physical product sale.
Practitioner & Systems Framework
💻 ERP Architecture
EVBs should be in a separate 'Product Category.' If EVBs are given away for free, the entire $450 cost is debited to 'Marketing Expense' and credited to 'Inventory' upon shipment.
⚠️ Audit Flags
Inventory Valuation. If the firm has 10,000 EVBs on the books at $450 cost but is selling them for $199, auditors will require an LCM (Lower of Cost or Market) write-down of the entire stock.
📄 Required Documentation
Sales invoice, kit BOM cost report, and the promotional pricing memo.
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