Location of the Sales / Purchases of Inventory Items is wrong


I think something is wrong. Sales of inventory items had located under income. But not received yet. So it must be under asset or accounts receivable. And the samething for purchase of inventory items. It must be under account payable or liabilities. Because these invoices has not paid yet. So how can it be income and expenses.


You are confusing cash basis vs accrual basis. Summary tab shows figures on accrual basis which always include all transactions (including unpaid invoices).

You can ask for Profit & Loss Statement report on cash-basis which will not include income/expenses incurred by unpaid invoices.


But i am talking about income and expenses. They must be cash basis. Cash on Bank and Cash on Hand must be under Income. When i am looking the summary, my mind is confused.


The program uses double entry Accounting principles. Every entry must have 2 parts. In this case the unreceived sales is recorded both as an income Sales (bc the business has made the sale and EARNED the revenue) and ALSO as an asset Accounts Receivable (bc the business is now OWED the money).

When (if) you receive the money then the 2 sided transaction Increases the Asset bank and decreases the asset Accounts receivable.

As Lubos said showing your profit for tax purposes can be done in 2 ways in the profit report. ACCRUAL Method where you show what you have revenue you EARNED less what expenses you have USED or CASH method where you show what you revenue you RECEIVE less what expenses you PAID (and include depreciation as well).

Either way uses the same double entry recording method described above to record the transactions and merely selects the figures necessary for the cash or accrual profit

In most cases the modules apart from Journal entries and conversion balances do the double entry recording behind the scenes so you don’t need to know Accounting. It will automatically and correctly do the double entry required.