COGS question

Dale Alspach alspach@math.okstate.edu
Mon, 13 Jan 2003 18:57:29 -0600


I suspect that this is one of those special accounts that QB does not like
you to mess with. Another one is Sales Tax. I think that the reason that
this is done is because of tax and accounting issues. The accounting issue
is whether the cost of goods is deducted when computing gross profit. On
some IRS forms it is deducted so that you really use a net revenue from
sales (gross sales - cost of goods) . This is reasonable since the cost of goods
is not really income. If you treat it as a normal expense, it will inflate
both the income and expense totals in reports. What you might want to try
is to make a subaccount COGS of inventory sales which is an income account
and another income subaccount which is gross sales.
Then the transaction would be
Inventory credit $50
COGS debit $50
Gross sales credit $100
Operating debit $100

The inventory sales account would show a net increase of $50.

Dale Alspach