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?!