Accounting for cost of sales (COGS)

As well as being inventory management software, Brightpearl also handles all accounting required to track asset values and Cost of Goods Sold (COGS). Brightpearl can operate in one of two inventory accounting modes:

1. Cost of Sales accounting ON

Accounting journals are created for every receipt or shipment of inventory, which updates asset account codes and COGS account codes on a continual basis. Most merchants use this method as it provides a near-real-time view on COGS and therefore profitability of sales.

  • Goods received into Brightpearl will increase asset value.
  • Goods shipped out will decrease asset value and increase Cost of Sales.

The asset value used for goods in will be taken from the Purchase Order, the default cost price list for your company, or in the case of sales credits you can also choose the value from the last item shipped.

Read more about inventory costing methods.

2. Cost of Sales accounting OFF (periodic accounting)

Accounting journals are not made when inventory is received or shipped; a Cost of Goods Sold journal will need to be entered manually for each period in order to get useful profit figures.

To calculate your periodic inventory values take the difference between opening and closing stock, taking into consideration any purchases.

Cost of sales accounting is activated at Settings > Company > Accounting: Options.

Which inventory actions result in journal transactions?

When cost of sales accounting is activated in Brightpearl, accounting journals for inventory will be created at the following times:

For goods out (sales):

  • Shipping items on a sale (cost of sales)

Read more about accounting for goods out.

For goods in (purchases and sales credits):

  • Receiving items on a purchase
  • Receiving inventory on a sales credit (returns)
    • Add into the warehouse
    • Place in quarantine
    • Write-off

Read more about accounting for goods in.

For inventory quantity and price corrections:

  • Adding or removing stock items
  • An inventory price correction is made
  • Unreceiving items on a purchase
  • Receiving the purchase invoice with a price correction

Read more about accounting for inventory corrections.

The following processes will never create any accounting entries:

  • Transferring items between warehouses
  • Moving items between warehouse locations

Accounting (nominal) codes

When items are added or removed from stock, journals are usually created using the account codes from the product record. Perhaps some of your inventory is classed as Asset type A, and some as Asset type B. Multiple asset types could also be reflected by multiple Cost of Sales codes (which are also assigned to a product record).




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