I want to use an inventory item for personal use, how can I record it? I am trying to record it through sale invoice and also through payments but option of using capital account is not appearing.
@Mabaega gives a solution that technically works. However, this would imply a drawing from your capital accounts as you requested to obtain a business inventory item. You may need to check if that is a legal practice with your accountant as it would change the value of your business.
Since you decided to setup capital accounts in Manager (Sole proprietors can do things differently see Manager guides) then it most likely means that you have more than one investor. In such case drawings of capital from the business need to be agreed in a minuted Directors meeting because other investors would be affected by the reduction in value and reduction in P&L as you have less of Item A to sell. The latter would thus represent a reduction in taxable revenue and this needs to be acceptable in your jurisdiction.
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To record personal use of an inventory item, create a journal entry instead of a sale invoice. Debit the relevant expense account for personal use and credit the inventory account. Ensure proper accounting principles are followed.
Rather than a journal entry, use an inventory write off.
Inventory write-offs use the Weighted average cost of inventory valuation to write off the amount of inventory withdrawn or written off. This makes it problematic to use for drawings as weighted average cost flow is supposed to be used for calculating profit in the P/L statement and not calculating the value of drawings. Journal entry allows you to enter the cost as you would want. You may want to use the latest market price of the item (Fair Value) to record the drawings (return of capital and that would be appropriate). If we bought an item on the first of January at $10 and another on 15 January at $20, using $15 as the value of one item if one item is withdrawn by the owner is inappropriate. This is because the market value of the item is $20 and the owner will get that amount ($20) if they were to sell it in the market, therefore $20 (or current market price) is what must be used. Also, the business will have to spend $20 to replace it.
So I think using the Inventory write-offs tool will not be appropriate in all situations.
You raise interesting points, @Abeiku. My purpose for joining this discussion was to call attention to the ability to use an inventory write-off to record non-revenue reduction of inventory on hand, rather than a journal entry.
That said, you definitely must consider local regulations on how to handle such withdrawals for personal use. One perspective is that you, as owner/partner/shareholder, are buying an item from the business. The easiest way to handle that is simply to pay for it at retail price. The business would enter a receipt.
But one might also make the case that the business has a certain cost in the inventory item and suffers no harm in parting with the item at that cost. After all, it is up to the owner(s) whether a profit is to be made on any given sale. After all, businesses often sell at a loss to build market share, clear slow-moving inventory, etc. In that sense, the value of the drawing is the average weighted cost of the item.
I don’t agree with your statement in the example that valuing an item drawing at $15 is inappropriate because the owner might be able to sell it for $20. The business is agnostic about whether a customer can make a profit by selling what it buys from the business. The same is true on every single sales transaction. The business did not acquire the inventory item at what you call “market price.” Presumably, its purpose is to buy lower and sell higher. But if it sells at its exact cost, there is no net effect on profit. As I already said, that’s a choice any business can make. This is no different than a chef buying food at a discount supermarket to resell rather than from a traditional restaurant wholesale source. (Sometimes, huge chains can sell at retail for less than smaller distributors can sell at wholesale.)
What you have not yet addressed is whether the owner is required, under local regulations, to recognize personal income related to the discounted price at which the item was obtained compared to market price. That’s not an accounting question, but a taxation question.