Materials purchased for jobs

In my home maintenance and repair business, I am constantly buying materials in order to make repairs. In my quotes and invoices I have been putting labour (hrs) under Income Account and materials under Expenses. I don’t know if materials are in the right place, because although the materials purchased are an expense, the client pays for them (along with labour) when they pay the invoice?

What you are doing is how it should be done. The next step (if you like) is to track profitability per job.

You can enable under Settings tab function called Tracking codes. Then you can create new tracking code per job.

Once you have your tracking codes set, you can go back to your expenses and invoices and mark each expense and invoice line item with appropriate tracking code.

Then you can go to ReportsProfit & Loss Statement and create new profit & loss statement report just for single tracking code.

This is how profitability per job is done in bigger companies where a lot of expenses and lot of invoices are involved.

Chances are that your operations are too small that you just know how much you’ve made without using special tracking function. In that case, I wouldn’t bother with tracking codes since it would just add unnecessary overhead to your data-entry procedure.

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Thanks Lubos, that’s good to hear. I was worried that I was not doing this correctly and would have to go back and change it all.

I don’t think I need tracking codes at this stage. Most jobs are small and simple.

In addition to my initial question, I often find myself not only purchasing materials for jobs but returning some of them after completion (items unused). I have created a place under Income called Materials Returned. I’m not sure if this is the right thing either.

Any advice would be greatly appreciated.

I wouldn’t use Materials returned income account, I would just categorize all those transactions to Material purchases so the actual expense total is decreased by those returns.

Both methods are valid from accounting point of view though.

Thinking through your statement and experimenting I finally caught onto what you were saying. I should put all those return transactions under the same Expense account Material purchases.

That’s right.