Cost of Sales

Hi there

I have created my inventory and recorded the Sales Value as well as the Purchase Value. I have also created the Income (Sales) and Expense Items (Cost of Sales).

However, I note that it is only taking items to Sales but not recording the cost of sales. I note that there is no Average Cost on the items. Would this then imply that Cost of Sales is calculated from Average Cost? Or what does it look at?

I have not captured purchases due to this is just a dummy “shell” profile of Manager I am using to have transparency in a sideline partner who will get 20% profit for her sales of my items. So I am not sure due to me capturing no purchases is the result. According to me, it should look at the purchase value of the item to calculate the cost. So I am not sure why there is no value. Please assist. All works fine in my real profile.

I assume you mean Sales price and `Purchase price."

I don’t know what you mean by this. Are you referring to having checked the boxes for Custom income account and Custom expense account? If so, what accounts did you select? To verify this, please post a screen shot of the edit screen for one of your inventory items.

Yes. If you have not entered any purchases of an inventory item, it has a zero average cost, because the item has no value in its subsidiary register in the Inventory on hand account.

The Purchase price field available when you define an inventory item is entirely optional. Its only purpose is to prefill purchase transaction forms (purchase invoices or payments) if you are usually buying at the same price. The only thing that matters for calculation of average cost and cost of sales is what you actually paid on real purchases.

I suggest that not try to keep a hollowed-out version of your accounts to show your partner. If all she is entitled to know is profit, you could show her the Inventory Profit Margin report. And if you only want her to see her own items, you could export the report to a spreadsheet and delete the other items.

HI Tut

Thank you for the reply. All your deductions on my posts where accurate.

You have answered my question actually by stating on that the average cost is calculated at the Average Cost. I need to see how the Inventory Profit Margin Report would work for me. Problem is that I myself sell the items but don’t want her to have the benefit of the profit of those sales. I know there is a tracking option but this becomes a little time consuming if you have lots of items on one invoice, but that is the alternative.

Will play around with some stuff but your recommendations will be appreciated.