I purchase stock throughout the year that I resell. Each sale is recorded appropriately and assigned to the income account. Can someone help me to understand why the purchase cost of each item is showing up under “inventory cost” In my expenses? Isn’t it already recorded as expenditure from its initial purchase and as an asset in inventory on hand? Clarification please!!!
expenses and income are part of your P&L. an inventory purchased is an expense. an inventory sold is your income.
assets and liabilities are part of your balance sheet.
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Inventory purchased is not an expense until it is sold.
Until then it is an asset and shows up on the balance sheet
When you make a sale, the cost of the inventory sold is transferred from the asset account to the expense account cost of sales
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@Joe91 @sharpdrivetek thank you both so much. Explained clearly and understood 