Hi when purchasing supplies I used purchase invoice to set up how much I have sent, but I have been placing these invoices under inventory on hand account is this the correct thing to do as even though the purchase is an asset it still is a expense as well, regards Vannessa
Only use inventory for goods held for sale or production. If you are purchasing supplies for the operation of your business (such as stationery or printer cartridges) allocate directly to an expense account such as Supplies or Office Expenses or whatever you have purchased.
You must realize, though, that a purchase invoice just creates an account payable. It does not record the expenditure of money. A purchase invoice is appropriate if you expect to pay at some time in the future. If you are paying as you purchase something, just use Spend Money.
Fixed assets should be used when the item purchased has a long useful life, normally more than one year. (But local tax law may govern this.) The cost is recovered through depreciation over time. Only the current period’s depreciation amount is an expense.
thank you for that what would you place food supplies under we are a licensed restaurant so we need to purchased alcohol and food
Others in the restaurant business could help you more than I can. I can see that it would be difficult to account for various meats, vegetables, beer, etc. as inventory when you are not invoicing for the same products in the same units. In other words, you buy 10 chickens, but you sell 30 entrees of some chicken dish. I think you could also consider the chickens as supplies.
Alcohol may be somewhat different, as you may need to comply with legal requirements.
Hopefully, other restaurant owners can help.