Auto Dealerships - Audit Technique Guide - Uncle Fed's Tax*Board

Appendix E
Glossary
The following terms have been used in the Audit Techniques Guide and are defined in a
summarized format. Some are terminology/jargon and are well known in the Auto Dealership
Industry or Service.
13TH MONTH JOURNAL ENTRIES: Correction of errors and adjustments to yearend
account balances typically are made at the end of the fiscal year and prior to the preparation of the
Trial Balance. These 13th Month entries are prevalent in the auto industry and are usually
identifiable by a unique source code on the General Ledger.
AGENT: An agent is one who represents and acts for another, whose function is to bring about,
accept performance of, or terminate contractual obligations between a principal and third persons.
BASE MODEL CODE NUMBER: Identifies an item of inventory which is determined by using
the entire manufacturer’s base model code number that represents the most detailed description of
the base vehicle’s characteristics under the Alternative LIFO.
BASE VEHICLE COST: The cost of a vehicle for Alternative LIFO Method computations that
is not adjusted for any options, accessories or other costs. The pool index computed from only the
base vehicle cost of vehicles is applied to the total vehicle cost, including options, accessories and
other costs of all vehicles in the pool at the end of the taxable year.
BASE-YEAR: The year in which LIFO was adopted for a pool.
BASE-YEAR COST: The aggregate of the cost of all items in a inventory pool, determined as
of the beginning of the taxable year for which the LIFO method is first adopted using the
current-year quantity. The base-year cost of an item is the cost at the beginning of the base-year
valued at its average cost. For items entering a pool for the first time, their base-year cost is
either the current-year cost of the item or its reconstructed cost at an earlier date.
BEGINNING-OF-YEAR COSTS (BOYC): Using LIFO, the costs of inventory items at the
beginning of the year.
BUSINESS PLAN: In the context of a Producer Owned Reinsurance Company, a plan usually
prepared by a professional outside the auto dealership setting forth domicile, capitalization, and
types of insurance subject to reinsurance.
CAR JACKET: A separate folder for each new vehicle sold which contains documentation
pertaining to this particular transaction.
COMPARABILITY: The basic concept of LIFO required by the regulations for computing an
index for items in a LIFO pool. This is the foundation of any LIFO computation.
E-1