DESKTOP EDITION CLOUD EDITION SERVER EDITION GUIDES FORUM

Why inventory expense doesn't show on P&L


#1

I need help to clear some doubts for reports.

I have created a Tracking Code “ABCD” where i am purchasing the Inventory items, spending the money on Transportation of Goods and advertisement and promotion of my business. Then I created an manufacturing order and used the inventory items purchased under the ABCD Tracking Code and added the manufactured item in inventory list.

After a few days I sold the Manufactured item under the Same Tracking Code.

Now I generated the loss and profit statement for ABCD tracking code for a time frame. The Statement only shows the Income = Invoice Value and Expenses = Advertisement and Promotional Expenses + Transportation and Courier Charges and the Total Profit = Income - Expenses.

My question here is that i have spent money for purchasing the Inventory items and Job Works to Get the Sold Item Manufactured. Why those expenses are not taken in to the account for generating Loss and Profit Statement.


#2

If you are using inventory, then inventory purchases are accounted in Inventory on hand asset account so they won’t show on P&L report.

When you sell inventory items, then inventory on hand is reduced and the amount becomes an expense.

In other words, inventory doesn’t become your expense until sold (or written-off)