Accounting Cost of Goods Sold and Inventory Item Cost

It won’t be shown under P&L if those accounts have no balance. By end of this month, you will be able to specify for each inventory item CoGS account. Then these accounts will have balance and will be shown under your P&L.

Right now, if you are selling inventory, all CoGS transactions are posted to account Inventory - purchases.

Lubos,

I must say your software is very user friendly and has a lot of capabilities apart from certain issues I have and the support is good, because you are somebody else responds fairly quickly. (Better than another program programs like Turbo Cash.

They do have a balance, because the stock was purchased, Production orders were created to do the BOM and they were sold as final Items.

I will wait for the updating of the feature.

Thank you

@lubos Thanks for the reply. Yes, tha’s what I’m asking, because COGS should include (Cost + Freight + Import Tax + Clearing Charges) right?

What I’m asking is how can I automatically capitalise all these expenses to the Inventory Item cost when I receive items through a Purchase Invoice.

Because, end of the day I would need to identify the costs I paid to the freight company, Customs authority and clearing agent to be seen separately? If I manually capitalise all these costs to the Inventory item, I would be paying to the supplier the total of his bill + freight charges + customs duty + clearing charges, which would again be wrong right?

So how do I do this via Manager i.e. associate all the COGS to Inventory Item and at the same time account it separately.

Thanks

@lubos Is there no way in the interrim to transfer the final stock by journal in order for it to reflect correctly?

The individual stock items show correctly, but stock items assembled in a final product does not show correctly.(Production Orders)

If you use Production Orders the stock Items are being deducted. The only problem is that it does not show under Direct Expenses.

There must be a manual journal entry one can use to show the final item under direct expenses.

Come one all the Accounting Guru’s…There must be something.

Instead of using expense account, categorize these costs under Inventory on hand account, then specify inventory item these costs relate to.

What you are doing here is essentially increasing your value of inventory on hand. When inventory it sold, the cost of the inventory sold will be transferred to Inventory - purchases expense account.

When you produce new inventory item using Production Orders tab, you are just converting one type of asset into another type of asset. It has nothing to do with expenses. Cost of goods sold is only calculated upon sale of inventory item (or inventory write-off)

@lubos,

This then does not make any sense, does it. I am not selling Inventory Items. I am selling a product made out of various Inventory Items.

How does the Computer Companies deal with this, because they are selling computers manufactured by the following Inventory Items: -
Mother Boards
Display Cards
CPU
Case
Ram

or Bakeries selling Bread mixed with the following products: -
Flour
Butter
Salt
Yeast

@lubos this is a very nice and easy program to use. If there was just a way to link the Inventory Items to the Final product in order to reflect as Direct Expenses.

@lubos and @tut,

I have done the following work-around and this was only a test to see whether it may work.: -

  1. I purchased the stock Items from the Supplier
  2. I created a production order from the Stock Items to create a final product
  3. The production of the final product resulted in the Stock Items to reduce.

The problem now is to get the final product to reflect as Direct Expenses, because this transaction is not yet functional in Manager.

Therefore I made a Journal Entry to CT Inventory on hand with the cost price of the final product and DT COS - Recharge 1.0Kg DCP (My COGS account for the final Product)

This resulted in that the amount cost of the final product is now reflecting as a Direct Expense on the P/L Statement.

In order to get income, I created an Invoice for the sale of the final product, and the result is as follow: -

This worked perfectly for me except for the problem that it shows an amount under operating Expenses which are now inflating the expenses.

Has anybody have any advice to get rid of it?

I am flattered to be included in your question, but you will notice I have not participated in this topic on the forum. I don’t use the inventory module, so I have nothing to offer. Sorry.

Thanx,

I thought you might maybe give some input regarding the accounting principle as you have done before

Sorry, @Kobus. The inventory functions of Manager use several hard-coded accounts. I’ve never used them, so I don’t understand them and do not know how they should be reflected in your multi-step income statement.

I discovered a better way to do this,which solves the problem.

After the creation of the Production Order, simply do an Inventory Write Off to clear the final product.

Any Comments on this?

Yeah, that will work. But it’s just more work since you have to manually keep writing off inventory items and you won’t be able to obtain profit margin figures for your inventory items.

As I said, wait until custom control accounts are implemented. They you can specify for each inventory item its own CoGS expense account.

1 Like

@lubos I tried it, but it doen’t work that way.

Pls see attached the screen shots.

Like you asked in purchase Invoice, I capitalised $200 for freight for the 10 pieces of Inventory item ABC. Inventory now shows 11 pieces with an Inventory cost of $1200. I think the value is correct here for the Inventory Item, but it still should have been 10 pieces. Now shipping is also categorised as an additional piece of the Inventory Item ABC

Can you let me know what I should do here?

Thanks a lot

@nineone
Try this method: -

  1. Create a stock item for ABC
  2. Create a stock item for shipping
  3. Purchase ABC on a Supplier Invoice.
  4. Create a production order for the 10 x ABC and 1 x Shipping
  5. Give the Final Product a name
  6. Create a sales and a cogs account for the product (Sales – ABC) and COGS – ABC
  7. The stock will be deducted from the Inventory with the cost
  8. When you Invoice, Invoice the Final Product Name on the Sales – ABC account. The shipping will automatically be included in the invoice.
  9. Do an Inventory Write Off to the COGS – ABC Account (The Developers are busy with a module to correct this. This is only a work Around)

This works for me. Whether you have 1 x ABC or 100 x ABC the shipping will only be R 200.00.
Hope this works for you.

@lubos

Yes, but remember it is only a work-around in the meantime untill the developers have completed the promised custom control accounts

@lubos so does it mean that for now there’s no solution? or have I done it wrong?

There is no elegant way to record this at the moment. One workaround is to decrease quantity from 10 to 9 so total quantity as per invoice will be 10.

@lubos that’s not an option right, decreasing the qty? So for now, we have to manage manually in Excel, the costs associated with COGS that we pay to different parties right?

What I’m saying - it is an option. The best way to record this at the moment is to simply divide total purchase (1,200) by quantity (10) and then just record purchase of 10 items at 120 unit price = 1,200 total which will be posted to Inventory on hand.

Next month, I will fix this issue so you will be also able to add amount to Inventory on hand with zero quantity. This would be useful for capitalizing non-qty amounts such as shipping.

@lubos

Again I think you are doing a tremendous job with this program.

When do you think this will be completed? How will we know when it is done?