Hi, many small businesses such as cafes do not track inventory. I cannot see how to simply set up to show COGS separate to Operating Expenses so you have Sales, less COGS (Opening Stock + Purchases, less Closing Stock) = Gross Profit, less Expenses = Net Profit, Where maybe Opening & Closing Stock can be entered as a journal entry whenever they do a stocktake ? Monitoring your Gross Profit Margin is very important and unless I (and my clients) can do that I cant see the value in recommending this program to them.(I am a Small Business Advisor).
To explain further, sales are simply recorded as a total cash sales for the day, and all stock purchases simply as Purchases.
In a cafe using inventory is impractical. Most of what you purchase are ingredients. You dont just buy in a tomato and sell it. You buy a bag of coffee beans and sell it in dozens of different coffees, same with milk, flavourings etc. It would be impossible and inaccurate to run an inventory system in these circumstances and not worth the time required to do so if it would work. So a simple Direct Costs account for Purchases so as you can monitor and measure Gross Profit is the easiest way to manage this in my view.
“The point is - you can designed the Chart of Accounts to do exactly as you want.There are no limitations, boundarys or controls.” And that is the way it should be, just a matter of knowing how to do it.
The Gross Profit should be a “New Total” as you want a calculation to occur.
Not a “New Group” as indicated above as that only provides a Heading
Ah, yes. That’s what I get for providing an example from a test business created by someone else. I was thrown off by the fact that when you add a new total, it shows up on its editing screen as a Group. But unlike real groups, you can’t make it part of another group.
So, @tec, you need to delete the Gross Profit group (3) you created and replace it with a new total of the same name. Your chart of accounts will end up looking the same, but the calculation will be there.
