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Posted by my-wings on December 9, 2006, 6:07 pm
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Laura! I think you've given me the missing piece!
>>
>>
>> According to my text book, Cost of Goods Sold is a calculation:
>> Beginning Inventory
>> + Net purchases
>> + Freight in
>> = Cost of goods available for sale
>> - ending inventory
>> = Cost of Goods Sold
>>
>
> The G/L account is Inventory and the ITEMS are Inventory Parts and
> Non-Inventory Parts. You need to be using both G/L accounts and Items.
>
This is the part I wasn't getting. I kept on thinking that I had to make or
find an account called "inventory", but I wasn't looking in the G/L for it.
>> When I use this to enter purchases and sales, both are updated, but now
>> I'm stuck. I think I need a JE to credit Cost of Goods Sold and
>> Debit...what?...I still don't seem to have an inventory account anywhere.
>
> Yes, purchases/COGs and sales/Income accounts are automatically updated as
> you buy and sell the books. At the end of the accounting period you will
> need to do a manual physical inventory to get your "Net inventory" in the
> above equation. Plug the info into the equation and you have your correct
> COGS amount for the period. Post a JE that adjusts the inventory and COGS
> accounts so that the equation is completed. Your accounting book should
> show you the proper JE that needs to be booked at the end of the
> accounting period.
Thank you so much for sticking with me on this! I think I finally understand
it now! And I'm off to enter a whole bunch of purchases and sales....
Alice
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