Inventory & net profit

1

I think Net Profit calculation is not giving the actual profit gains from selling a product. For example if I purchase a 100 units of ITEM1 for $1, then sell 20 units for $1.5. it calculates net profit = $30, while in reality the net profit is only $10.
I suggest the following:

  • Creating ( Products value) account in Assets
  • Creating ( Sold Items ) in Expenses
  • when we make a purchase the total amount will be added to Products value ( $100 ) in my example. Then when we sell 20 units of the product, we add $30 on Sales account, and we should add the (20X$1=$20) to Sold items ( as an expense). in the same time we should deduct ( 20 X $1 = $20 ) from Products value account and it will become only $80, In this case the net profit will be 30-20 = $10 which is true.
    The problem is I have to open a double accounting journal to transfer the $20 between Products Value acount and Sold Items account which is a manually procedure has to be done with every sale invoice.
    Is there any method to make this happens automatically?!
    Thank you
2

You are correct and inventory module will do these entries automatically.

Without inventory module, you will need to enter journal entries as you have suggested but you don’t need to do it after every invoice. Some businesses will simply do it once a month or even once a year (for accounting purposes)

I hope to add proper inventory functionality pretty soon. It’s one of the most requested features…

3

Thanks for your reply!
Yes it is very necessary to add the inventory plugin. And I am ready to give any support regarding this, since it is a little bit complicated and has quite a lot of details.