I’m certainly not. I’m saying that there is no difference. You are claiming that there is a difference based upon the order of and other intermediate steps taken. I am arguing that the net effect is the proper measuring point.
He takes $100 out, puts $100 back in and takes $30.
How is that different than just taking $30?
Look, Sam’s Shoe Shop starts the day with 11 pairs of gumboots in stock. Price is $70 per pair.
At the start of day, $50 worth of small banknotes and coins is put in the till.
In the morning, 2 pairs of gumboots are sold, @$70, total $140. 2 sales are recorded.
At lunchtime, someone steals $100 from the till. Then buys a pair of gumboots @$70. 1 sale is recorded.
In the afternoon, 2 people buy pairs of gumboots, @$70, total $140. 2 sales are recorded.
Day’s total, 5 pairs of gumboots sold @$70. Total sales $350.
At the end of the day, Sam checks the till. Sam is expecting to find $400. He actually finds $300.
He checks the stock. 6 pairs of gumboots remain, and 5 sales are recorded. This matches what he expects.
There is $100 cash lost , and no stock lost.
That is what his bookkeeping will show, no question about it. I agree. So can we stop with the accounting/bookkeeping aspect of it? The question doesn’t ask what the accounting will show. It asks for a true measure of loss–something which accounting and bookkeeping do not always provide in every circumstance.
As we are in “God mode” we realize that but for the thief’s illegal actions, Sam would have 7 pairs of gumboots in stock and $330 in the register. He actually has 6 pairs and $300. What did the thief’s actions cause Sam to lose? That is the question being asked, and we can see that specifically by looking at what he would have had without the thief and comparing it to what he has when the thief’s actions are applied.
Followup question: if that thief then steals $100 from Sam, and spends $70 at Baxter’s…
He has six pairs because he sold one pair to the person who stole the money. He’s not “out” a pair of gumboots. That’s like saying that he’s “out” all the other pairs of gumboots that he sold.
(I wish everyone had used a name other than Sam for their examples.)
It all just adds up one on the other, don’t you see! He’s stolen the money and stolen the goods at the same time as using the stolen money to pay for the goods. He’s Schroedinger’s thief!
Again, though, why does the fact that the thief used a particular method of thievery that accomplishes the same thing change the amount of the loss? Do you disagree with my before and after snapshot? Why is that not a proper, real world measure of what was lost?
Ah, here we get to the root of the disagreement. You are assuming that Sam gained an extra sale from the incident.
I, however, am assuming that the same pair of boots would have sold anyway. Somebody would have bought them, if not the thief. Maybe the next day, or the day after that. Or maybe the thief would have bought them with his own money. Maybe he came to the store specifically to buy boots, and the theft was just opportunity.
I’ve said a couple of times already that this makes a difference to the answer.
It’s really weird to assume that this was not an ‘extra sale’.
If the thief goes into the store, takes a $100 item off the shelf and leaves, the store’s loss is the wholesale value of the item (presumably less than $100).
If the thief goes into the store, takes a $100 item off the shelf, rings it up in the register as a sale but doesn’t put in any money, and leaves, the store’s loss is exactly the same.
If the thief goes into the store, steals $100 cash, buys a $100 item with it, and leaves, the store’s loss is exactly the same.
The only difference is the paperwork. And the actual loss is not $100 in any case, though it could show up that way on paper.
Your snapshot analysis fails because if does not account for all possible scenarios and is based only on your supposition that the thief would not have purchased the gumboots had they not stolen the money. This is not a given and there is no way to determine that.
If the thief came in with at least $70 and the intention to purchase a pair of these boots anyway, and then happens to see that the register is open and unwatched, the thief takes the $100. The $70 purchase by that individual would have taken place anyway, and in that case Sam would have suffered a $100 loss.
If that is what had occurred, your snapshot analysis method simply fails. Note that it doesn’t matter if the thief uses the same $100 bill or uses their own cash.
Another possibility is that there are a limited number of products. A takeout only restaurant near my place makes something like 20 Peking Duck meals a day (photo from Internet) and doesn’t take telephone reservations. First come, first served. I have yet to see them not sell out.
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A thief stealing money from that restaurant’s till would result in the next loss of cash and not the gross profit of the meal because someone else would have purchased the food with “clean” money.
There are limits to our “God mode” because we aren’t omniscient. We don’t know the thief’s intentions and we don’t know the total circumstances. Certainly, you can make qualifications in such a manner to ensure that your analysis would work but I can also create ones in which it would fail.
Your argument that the accepted bookkeeping is wrong because if fails to account for “God’s view” is fundamentally flaw because “God’s views” tells us nothing.
We do know that a theft was committed and we know the amount of loss. I see no advantage in replacing that with a flawed system which requires a list of qualifications which may or may not be true.
You’re ignoring the profit the store made on the sale. If you’re going to consider both the theft and the sale, then you need to subtract the profit the store gained from the sale from the amount they lost from the theft.
Compare the state of the store at the end of the day if the thief had never walked into the store, versus the state where the thief did both the theft and the purchase.
No Thief
Cash: $330, $50 at start + $280 sales
Stock: 7 pairs of gumboots , 11 pairs at start - 4 pairs sold
Thief
Cash: $300, $50 at start + $350 sales - $100 stolen
Stock: 6 pairs of gumboots , 11 pairs at start - 5 pairs sold
Assign an inventory value to the gumboots, and then total up each scenario, and compare the two end results. If that inventory value is less than $70, then when you compare the totals of the two scenarios, it will show that the store lost less than $100.
The accounting will show that the loss is less than $100. The problem is that the sale isn’t being accounted for properly. Assume the item cost the store $60.
Theft
Credit $100 - Cash
Debit $100 - Cash Lost Expense
Sale
Credit $70 - Sales Revenue
Debit $70 - Cash
Credit $60 - Inventory
Debit $60 - Cost of Goods Sold
On the balance sheet side, the store’s credited $30 in cash and $60 in inventory - so a loss of $90.
On the income statement side, the store’s debited $100 in cash lost but credited $10 in profit ($70 revenue - $60 COGS) for a $90 loss on the opposite side.
This makes the same mistake which I identified above. It’s assuming information not provided in the riddle and covers only one scenario but fails for the reasons above.
I agree. Which is why I say the owner lost $30 plus the value of the item. And because there are many possibilities, we don’t know the value of the item to calculate a dollar value loss to the store. That is exactly why I disagree with saying $100. It is possible the shoes are a $70 loss. It is also possible that they are less than a $70 loss.
My bolding.
First, you are not addressing my point that if the thief had already intended to purchase the product or if the product were to be purchased anyway that day, then your analysis fails.
The argument over the gross product is a moot point if the method of calculating is wrong.
It’s really frustrating that none of you have even considered whether the store was about to go out of business and just needed $100 more to stay afloat. Maybe they lost everything. WHAT THEN???!?!?!?!?!one!?!
If the thief had intended to purchase the item anyways that day, with his own money, then the value of that item lost was $70, and the total $100 figure is true. But, as you note, we don’t have any information about the item. So the best we can do is say $30 plus the value of the item (and then we get ambiguities about what should properly be counted as a loss).
So you have invented an accounting system which assigns values to products depending on unknowable intentions of customers? I presume that isn’t taught as a freshman class.
Nobody is talking about accounting!!!
The question asked how much the store lost. That does not mean what does the IRS thing you lost or what GAAP thinks you lost.