Hi there. I tried to understand this before so forgive me for trying again. Its like this:-
I buy stock items from suppliers and allocate to COGS
When I invoice the customer, I allocate stock items to Sales-Stock (I allocate labour to Sales-Labour)
I made the 'Assets-Inventory' account as described and entered my inventory start figure (stock items) from my last stock check (about 12K)
I made the monthly adjustment as described (stock decreased) but this made my COGS account higher. When I did a P&L report, my COGS used (stock items as I understood) was far too high so it looked like no profit for the month.
So I must have made the adjustment the wrong way? If I had made the adjustment as a stock increase, my stock items value (in inventory account) would grow and grow. This would have made my COGS right. It is always around 50% of turnover.
So, how do I get this to work? What I need to do is this. Have a stock figure, add to it when I buy items and deduct from it when I sell items.
I can easily see how much stock items I use as I actually make out invoices for customers in another quote/invoice system. I use Solar to do the actual accounts.
Anyone have an idea of how to do this? Don't mention Quickbooks as I have changed to the excellent Solar to make life easier.
Hi Rob,
Glad to hear you prefer our software to Quickbooks!
Our recommended approach to tracking stock is here:
http://www.solaraccounts.co.uk/help/how-to-track-changes-in-stock-level.php
Note that when you enter the adjustment for a decrease in stock, the amount is the NET change in stock. For example, if the value of the stock went from £12,000 to £11,000, the Amount figure in the General Transaction would be £1,000 - this would then reduce the profit by £1,000.
If you are finding the above process too complicated, here's an alternative technique that you may find easier:
1. When you buy stock, allocate to the 'Inventory' account.
2. When you sell stock, record two transactions: a) an invoice allocated to an income account; and b) a General Transaction from the Inventory account to the Cost of Goods Sold account.
Cheers,
