I seem to have a problem with cost inconsistency when I open a P/L report. If you look at the attached screenshots, the top image shows the purchase invoice, the cost of the product that I have inserted $2273.00 this the correct cost of the product that i’m purchasing. Now when you look at the P/L report the cost of inventory is $723.77 which is much lower amount therefore a higher profit amount which would be incorrect. Can someone help me out please, thank you.
Cheers
Pete
It is impossible to tell if this is correct as you have not shown how many items you have sold
Also, your business name seems to indicate that you have imported a saved business multiple times
Why are you showing the P &L on a cash basis?
Thank you for you reply, only one item has been sold in this time interval, I use the cash basis as opposed to accrual basis because all sales via my website are paid at the time of order.
Cheers
Pete
You need to drill down on the inventory cost figure and show the result. Inventory- cost is the sum of units sold multiplied by their average cost at the moment of sale. That in turn is determined by your purchase history, not the last price at which you purchased.
Thank you for your help Tut, I will go digging.
Cheers
Pete
If you are using cash basis, then your sales and purchases are based on and accounted for when receipts and payments are made
This may be appropiate for your sales where payment is made at order time, but may not be ok for your purchases.
Do you keep inventory or do you purchase inventory only when you receive an order?
When do you pay for purchases?
Just been in touch with my accountant and she informs me I should be using accrual even though I receive payment when a client orders and when I purchase product they are paid at time of order, (all my product comes from China hence the upfront payment. I do keep inventory but in this case the product is specialised for this particular client.
Cheers
Pete
That is very often the case. But you should still follow the advice given above to make sure you are entering transactions correctly.
Thank you for your help, I think it’s fixed, I deleted the purchase order, sales invoice and payment receipt from the client and started again it now looks correct.
Cheers
Pete