Level 10

Reports and accounting

If you look at the underlying journal entry of an invoice, you will see that when you use an inventory item, there are 4 lines, while for non-inventory item there are only 2 lines (assume no sales tax or discount). The first 2 lines increases your sales and assets: debit cash or AR and credit Sales.  The extra 2 entries moves the cost from the balance sheet (Inventory asset) to the P&L (COGS)  debit COGS, credit Inventory asset.