excellent explanation and I’m getting on board with it. I think where I’m struggling then is with the fact that almost everything we purchase IS an expense. (At least that’s where I put it ;))
For example, the drinks are really such a small part of the business, it’s hardly worth tracking them. They’re purchased, can sit on the shelf for weeks and eventually get sold and replaced. Whilst there is good profit in them, they’re not the movers of the business.
What IS a mover is meat, particularly chicken meat. We buy it in bulk bags on an almost daily basis. Then beef every other day and pork maybe twice a week. They’re a HUGE daily expense, but not really trackable against P&L (at least not yet since we’re not tracking portions into meals as well as actual meal sales—this will be starting next week). So purchases of meat hit P&L straight away, but then (I suppose) so does the sales at the end of the day.
(I’m going to apologise for the following question in advance, I have asked the accountant, and she’s not in a hurry to sort this part out yet and has said twice now “just wait til we do your tax, we’ll shuffle everything around then” )
You said: [quote=“Brucanna, post:2, topic:7808”]
Or put this way, you open a new shop tomorrow and purchase 10,000 of inventory today to stock the shelves, if that cost was to appear in the P&L then you would be making a loss of 10,000 before the doors even opened and may take a while to be profitable. Sell 5,000 but buy another replacement 3,000 = 13,000 out and 5,000 in.
Whereas, storing inventory in the BS and only transferring its cost when a sale occurs provides a more complete picture of performance at the Gross Profit point - Sales less COGS
In essence, because we’re not a grocery store, that IS what we did. We’ve had a massive outlay of initial cooking stock and it’s going to take a while to offset that, although almost everything that was purchased initially has already been replaced at least once—I said almost) For example, 20L drums of all sorts of stuff from cleaners, to sauces, and tubs of curries, vinegar, oils etc… My question being, all those costs, including the cost of fit-out, bonds, maintenance and repairs of existing equipment; these are “expenses” right?
Something I haven’t liked about the P&L, is my lack of understanding of how to have it reflect accurately for a period. Especially when a period may have a one off expense that just throws the whole week, month or quarter out.
Is this some where that I should/could be creating control accounts for things that are regular expenses, and then those other longer term expenses? I mean, I’d like to use the P&L to analyse my meat and veg expenditure against sales but every other week theres something that is on the P&L that throws it out whether it be gas or rent or advertising etc. I realise these are still recurring costs, but they’re more of an attempt to drive further sales, or things that are just required to be paid. I’d like to be able to determine how much extra purchase of meat and veg translates at the til. Our rent doesn’t change, electricity will be marginally differnt. Gas will be different, etc.
I’ve rambled too long. The point I was trying to make, I’m liking the idea of inventory and it being an asset and bringing it into the P&L at the point of sale, but for a restaurant, our biggest purchases and what drives our sales are not tracked at an inventory level.
Or can I in some way do that?