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Anonymous
Not applicable

COGS not adding up

I got this back from my accountant.

 
COGS do not add ups:
 
Per PNL report:
 
Income
Merchandise Sales
199,872.74
Sales Discounts
-4,824.03
Total Income
195,048.71
Cost of Goods Sold
Broken Merchandise
-9,786.10
Cost of Goods Sold
60,540.62
Merchandise Purchases
-82,825.04
Purchase Discounts
-1,038.19
Stolen Merchandise
1,924.39
Total COGS
-31,184.32
Gross Profit
226,233.03
 
COGS calculation should be:
 
Opening inventory
+purchases
+Freights
-Ending inventory
 
Obviously something is set up incorrectly but I can't figure out what. Please help! Actual P&L attached.
6 Comments 6
Alessandra_B
QuickBooks Team

COGS not adding up

Hello @Anonymous,

 

Your Profit & Loss report is showing the correct amounts. It'll be my pleasure to provide some details about this.

 

In the calculation of your Cost of Goods Sold (COGS), freight charges are not included. The COGS calculation only includes the costs of your items. This said, freight charges are a separate line item from your inventory items when entering transactions. 

 

Feel free to leave a comment below if you have any other concerns. I'll be here to help.

Anonymous
Not applicable

COGS not adding up

Thanks for your reply. Are you saying that freight should be included in cost of goods? If so is it just a matter of changing the account type of freight to COGS? Thanks.

HoneyLynn_G
QuickBooks Team

COGS not adding up

Hi there, @Anonymous.

 

I appreciate you coming back to us for additional support. Allow me to join this thread and clear this up for you. 

 

As mentioned by my colleague, inventory COGS is only affected when you sell inventory items on invoices or sales receipts. Freight charges are not included in the calculation of the COGS.

 

However, if you wish to add the freight charge on your COGS amount, you'll have to edit the account associated to your items. I'd still recommend seeking an accountant for an expert's advice to ensure there will be no problem with the books in the future.

  1. On the top menu, click Lists.
  2. Choose Item List.
  3. Double-click the item.
  4. Go to the COGS account field and make sure the account select is COGS.
  5. Click OK to save the changes.

 

Keep me posted on how these steps work out for you. I'll be here to keep helping if you have additional questions. Just leave a comment for me. Have a good one!

Anonymous
Not applicable

COGS not adding up

So the question then becomes why is gross profit showing up as a greater number than total income?

HoneyLynn_G
QuickBooks Team

COGS not adding up

Hello again, Norm758.

 

The Gross Profit amount is the sum of your Total income and Total COGS.

 

Income+COGS=Gross Profit

                        195, 048.71 + 31, 184.32= 226, 233.03

 

To understand and learn more about the accounts in QuickBooks, I recommend checking out the link below. Your accounts are based on the industry and type of company you choose when you set up your business.

 

Understand QuickBooks Chart of Accounts

 

Keep me posted if you have additional questions about reports or accounts. I'm still here to help you more.

Anonymous
Not applicable

COGS not adding up

Hi HoneyLynn,

So my ongoing research indicates that my merchandise purchases should not be showing up as a negative number, that seems to be what's throwing things off. Can you walk me through how to set up purchasing inventory for resale?

 

Thanks,

Norm

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