Inventory COGS - add a cost to an item

I own a business that buys product and resells online. We also make products and sell them online. I have set up separate Inventory Asset accounts for each type, like this:

I have corresponding COGS accounts for each, like this:

I have some things that I already own that were either gifts or I just can’t remember what I paid for them. I entered one such item in Inventory Items and set up the beginning balance to “1” so it would show Qty. on Hand. I didn’t put in a cost because it was a gift to me and didn’t have a purchase cost to me. It looks like this:

I recently had this comic book graded. This cost is specific to the item and I paid for it from my business checking account, no purchase order involved. How do I post the cost to the item? The cost would then be COGS. It should automatically post the cost to COGS when the item sells. It is not a purchase cost. Would I need a separate COGS account for that cost?

Also, any suggestion on how to track the items as contributions? Maybe a custom field or something? I don’t like to include that info in the description or the item code but that’s how I do it right now.

To add to the average cost of inventory on hand, Spend money and allocate the transactions toInventory on hand => Inventory item, but leave the quantity at zero. Average cost will be adjusted, but quantity will not.

You could use a custom field to flag something as a contribution, but other than possibly being informative, that would have no accounting impact.

You should check with a qualified local accountant for rules about whether and how to value contributions. Local law will probably govern. They might be considered an equivalent contribution of capital.

@Tut,

Thank you, that works! :smiley:

Yes, I just wanted it for informative purposes. It isn’t really necessary, just helpful.

I’m playing around with using either the starting balance or using expense claims. With expense claims, I can put in the description that it is an owner contribution. I just leave the $ amount blank. As you stated in another post somewhere on here, the value of the item wouldn’t come into question until I sold it, so that part is irrelevant.

I will be checking on this with my next visit. It can get very confusing sometimes, especially when dealing with collectibles and antiques and such.

Thank for the reply! @lubos I’m loving the program!

I don’t see much point in this, unless you are using it as a route to establish the inventory count. Still, I would resolve the issue about how to treat contributed inventory and handle it all at the same time. Especially with valuable collectibles, I would want to immediately recognize a contribution to equity, whether that means owner’s equity for a sole trader/proprietor or a capital account.

Yes, it establishes inventory count. It also show the item as a contribution and should I need to recognize a value for that product then all I would need to do is add the value to the amount. This would solve the problem of recognizing the contribution to equity. Right? :confused:

If you added a value to the Inventory count within the Expense Claim, that value would get added to the Inventory On Hand account and would also create a contra value within the Expense Claim so that the Expense Claim now has a balance.

If you have set yourself up under Settings - Expense Claim Payers, then you will need to transfer that balance to Equity via a Journal. However if you have activated the Capital Accounts tab and added yourself there, the Expense Claim will automatically get posted to Equity

I am set up as a member in the Capital Accounts. When I add something with an expense claim it adds the value to my capital account. Are you saying that I am still going to have a contra value within the expense claim if I do it this way?

No, what you have described is exactly the same as I described here

However if you have activated the Capital Accounts tab and added yourself there, the Expense Claim will automatically get posted to Equity

yup. Which is why I was experimenting with using the Expense Claim in this way.

I’m still having trouble getting the COGS to post correctly, though. If I add costs to an item like Tut suggests above:

it adds the cost to the purchase cost and when I sell the item it transfers that cost to COGS Purchases.

I wanted to add the cost of grading the comic book to the cost of the comic book but separate from purchase cost. So, the cost would come out of COGS “some other cost”

I don’t know if that makes sense, sorry

An inventory item can only have “one” cost, so either combine the grading cost to the purchase cost or expense the grading cost directly to a P&L - COGS - Some Other Cost account

ok. Thanks!