My apologies if this forum isn’t the right place for this question, but I know there are some bright cookies here who might be able to help.
I manufacture goods which require a two step process before they are sold. I sell herbal medicine in capsule form, purchasing and processing the fresh herbs before they are put into capsules, then into bottles, and then sold. This means that labor costs are a major part of my overall COGS. At the beginning of 2016, I opened up a new Manager account, and included estimated costs of labor in all of my processed materials to better reflect costs. My question is this: the cost of labor is included in Expenses: Inventory-sold because I’ve set the value in opening balances to include how many person hours and how much it costs my company at each step of the process. However, I also pay wages at the end of the month. This means that my P/L statement shows far less profit, as labor is essentially being counted twice, even though my retained earnings look normal. Is this the correct way to do it? Are there any other Manger users that do it this way? Or do I need to revert to my old way of keeping material costs completely separate from labor costs in Manager?
Thanks to anyone who has suggestions/corrections to my method of accounting.