Perpetual Inventory Journal Entries
Hi Jobird
When you have an item that is set to be I Inventory this Item, you do get the option to select a series of accounts:
- An Asset account for Item Inventory,
- Income Account for Tracking Sales,
- Cost of Sales Account.
Basically, in short, when you record a purchase it will add the inventory into the stock i.e. the Inventory asset account. When you record an invoice, the system will record the amount of the sale to the income account. It will also reduce the asset account as the item is coming out of stock and increasing the cost of sales amount as the item has been sold.
As such, if you are looking at what the value of your closing stock you would typically be looking at the Inventory account amount. As this is would be impacted by each transaction you record for those items i.e. increase when stock is purchased, decreased when stock is sold. Using the cost of sales account may not give you an accurate value as it will not factor into items that you purchased but not sold (as is there is no sales there is no costs of sales).
