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Cawoline
June 18, 2021
Question

Inventory - Cost of Sales + Purchases - P&L

  • June 18, 2021
  • 1 reply
  • 0 views

Hello,

 

I have a question regarding the impact of the sale of my stock products in the P&L.  

Let's take an example : 

- On February 2020, I place an order with a factory in China to buy products that I will sell in my shop. 

The bank flow will be reconcilied with the factory invoice and categorized as 'Purchase' (and will, therefore, impact my P&L)

- Then I create each product sheets in the inventory part on Quickbooks (impact on my 'Inventory Asset' - Balance Sheet)

- Finally, I sell these products in my shop and, with each customer invoice created, here is the impact on my accounts : 

    1. Decrease in 'Inventory Asset' (Balance Sheet) 

    2. Increase of  'Cost of Sale' (P&L)

    3. Increase of 'Sale' (P&L)

 

So, I see a double impact in my P&L : 

1. Increase of my Purchase : with the Bill payed to the China factory, on february 2020. 

2. Increase of my Cost of Sale : each time I sell a stock product and create a customer invoice.

In the end, it's like I was paying twice for my merchandise..

 

Can you help me please ? 

 

Thank you in advance for your precious help.

 

Caroline

1 reply

JessT
JessT
June 18, 2021

Hello Cawoline,

 

Welcome and thank you for posting about the Cost of Sales. I'm happy to shed light on it.

 

You're not hitting your Profit and Loss yet when you record your purchases. The only affected accounts are your bank account and your Inventory asset account which are Balance Sheet accounts. You can open the transaction journal of your purchases to check that out.

  1. Open the bill, expense, or check transaction.
  2. Click More at the bottom.
  3. Select Transaction journal.

You will only hit your Profit and Loss when you sell the item. This is the unique characteristic of inventory items because they have a special expense account called Cost of Sales. It means their cost is only realized when there is a sale. You can ask your accountant about this one.

 

Hope this clears up everything. If you have questions, please comment below. I'll be more than happy to help you again.

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