Expanding inventory from retail to manufacturing

Hello @Brucanna & @lubos,

This is my 3rd year using Manager & fully one year using cloud version.
Since the company expanding from retailer to small manufacturing company, the inventory structure has a major changes.

Currently, we are using inventory tab from the 1st year as retailer. We want to set up opening & closing stock as we are making our own clothes from raw materials now.

Mind to share how do we start?

Where did the stock of raw materials come from?

@DSM_Enterprise, I moved your question to a new topic. It was not appropriate for the one where you originally posted it.

All you need to do is start adding new inventory items for raw materials. Then record their purchases as you have been for finished clothes. Use production orders for manufacturing. There are Guides about all of that.

Hi @Tut,

Currently, we are using inventory tabs where Raw Materials and Finished Goods both are in balance sheet account. Our concern is how to make a opening, purchase & closing stock account in the P&L?

I think you want draft chart of accounts for manufacturing account. Can the seasoned experts provide an example of this for the benefits of others.

You do not opening and closing stock accounts in the P & L accounts. When you sell a manufactured product the cost will be calculated and pisted to a Cost of Goods account.

Manager uses an average cost to value inventory and calculate Cost of Goods sold

COGS also in P&L, right?
So how do I converted from my current inventory (BS) to opening/closing stock (P&L)?

I just explained there is no opening/closing stock in the P&L

Have a look at the sample company Northwind where they have Production Orders and who sell manufactured goods.

If you find that to complicated, then setup a test business with some raw materials, produce a finished good and sell it to see how Manager manages the accounting

Read the three-part series of Guides starting here: https://www.manager.io/guides/11111. Everything is illustrated.

Hi, Tut.

But this guides still not answering my question.
It seems that manager has simplify the accounting.

Every time you produce some finished goods, Manager will calculate the cost of the finished goods and add it to the total cost of the finished goods. It will then calculate the average cost of the finished goods in stock and it will value the inventory using theis average cost. This value is stored in your Inventory on Hand account in the asset section of your Balance Sheet

When you sell one of these finished goods, the inventory will be decreased by one unit and the cost of the unit will be posted to the Cost of Goods account in the P&L statement

When you use average cost to value inventory there is no opening stock + purchases - closing stock equation

If you need further explanations, please go to www.accountingcoach.com

A simple test in a test business will make all this clear

Yes I do understand how the production order works in Manager. but to create opening stock + purchases - closing stock account seems not applicable in manager,

I’m deciding to continue using production order and not changing the account in P&L. However, manufacturing cost not easy to apply in production order. I’m working on “test business” based on many topics in manager forum.

The manufacturing cost is calculated as the cost of the materials used to produce the finished goods plus any extra non-inventory costs you include in the the production order

Let me share what I encountered in the test business.

Customer A ordered 1 pc of t-shirt, I issued invoice as illustrated in pic.

Then, I ordered raw materials as in 2nd & 3rd pic.


Then I made the production order

Assuming order has been delivered to customer. This is how the inventory look now

Assuming end of month, i need to pay the worker so i created payslip.

As ilustrated in summary, why INVENTORY - COST only 4.00 and salary & wages only 960.00?

You need to change the Production stage on the inventory items - did you notice the warning message on the Inventory screen

Update the production stage and see what you get see here https://www.manager.io/guides/28367

These are used to calculate production costs correctly

This can be done, but its best done at the end of a financial period, say any month end or year end.

First you have to create these accounts:
BS: Stock on-hand
P&L: Opening Stock, Purchases, Closing Stock
You can look at this topic for the COA structure Inventory accounting using Opening Stock + Purchases - Closing Stock

Then you need to transfer the Inventory values in “Inventory on-hand” into “Stock on-hand”.
This can be done by entering each Inventory Items with a value into a Journal Entry.
Enter for each Inventory Item the “quantity” and the “total cost” as a credit.
Against the Stock on-hand account enter as a debit the total inventory value.

Then, after this process, allocate all future supplies to the P&L > Purchases account.
Then for the future follow the process as outlined in the topic Inventory accounting using Opening Stock + Purchases - Closing Stock

With regards to the Inventory on-hand account, if you select “don’t show zero balances” it wont be seen

Thanks for replying @Brucanna
I find this whole inventory adjustment will be a mess at my end. So I will leave it at the way we work it right now.

It shouldn’t be as it is only a Journal Entry.

Eventually I came back to this topic again :sweat_smile:
My auditor query the P&L that not showing stock & purchase :joy:

Im trying your suggestion now @Brucanna
Thanks

Hi @Brucanna

What should I do with the Inventory-Cost if I make the opening stock, purchases, closing stock in P&L?
Can I use both inventory tab & opening stock + purchases - closing stock?