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We enter items purchased for resale as Non Inventory Part and then put that under COGS. But I notice some of our parts are in the "sales" account. How should they be entered, and should I change all the items in the "sales" to COGS? to allow for the correct figuring on reports to show profit after cogs.
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If you are using non inventory items to both buy and sell, you must check the box on teh item screen that says this item is used in an assembly or for resale, then select both the expense account for purchases and the income account for sales
You are in effect keeping what is called periodic inventory by posting directly to cogs for items you stock and sell - that is not a problem but you should be aware that an auditor will expect to see you value the inventory on hand at the end of the year, and transfer that value out of cogs and into an asset holding account. Then at the start of the new year you transfer that value out of the holding inventory account and back into cogs.
COGS is the cost of items sold, not purchased when income tax time rolls around
If you are using non inventory items to both buy and sell, you must check the box on teh item screen that says this item is used in an assembly or for resale, then select both the expense account for purchases and the income account for sales
You are in effect keeping what is called periodic inventory by posting directly to cogs for items you stock and sell - that is not a problem but you should be aware that an auditor will expect to see you value the inventory on hand at the end of the year, and transfer that value out of cogs and into an asset holding account. Then at the start of the new year you transfer that value out of the holding inventory account and back into cogs.
COGS is the cost of items sold, not purchased when income tax time rolls around
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