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COGS has tax invoices

Jonathan Lucas

I am reviewing the Revenue and COGS accounts and have discovered entries in COGS that relate to a Tax Invoice (revenue) rather that a bill (cogs). How do I correct this?

Comments

gazza73

If the invoice has items, perhaps you have such items associated with an account code that is cogs instead of an income account. Change the associated account , on the item list. Then refresh the item inside the offending invoice. Gary

Jonathan Lucas

Thanks for your comment. The invoice does have items but the items are set up with an income code & a cogs code which are both correct

Kris_Williams

That’s how inventory items work. When the sale is made and an invoice done the cost of the goods is posted to the COGS account, unless inventory tracking is essential I use non inventory items to avoid this.

Linda ABC

As Kris has explain Jonathan - this is how inventory items work - when you purchase the stock - it goes to your Balance Sheet Asset account for Stock on Hand (DR entry) .... as each items is sold - the cost of the item reduces the stock on hand balance (CR entry) and increases your Cost of Goods sold account (DR entry)... this happens in the background of the tax invoice for the sale - so the entries you are seeing are the ones that should be there... Provided you have setup your inventory items correctly and are purchasing them correctly with their unit prices etc - then all will be well.

Gitta

That is very confusing. I checked other Softwares as QBO and Xero and I only can see bills in COGS and not Tax Invoices as in Reckon Hosted. I am worried that the BAS Amount is incorrect as we claim the GST on the goods purchased which are sitting in the Asset Account and we are paying GST on the Sales. If the Sales e.g. Tax Invoices show up again in COGS isn't this a double up on GST on Sales?

Thank you for your answer.

Gitta

Acctd4

Hi Gitta

There are a few things to consider ...

1 is the Tax Code - Unlike some of the other software, RA/RAH has separate tax codes to distinguish between incoming (sale/income) & outgoing (expense/purchase) transactions. This allows the integrated BAS within the software to populate the correct figures at the correct BAS labels. You will get a warning if you use a sales tax code on a purchase transaction & vice versa. In fact, if you have your system setup optimally, it will actually prevent this happening:

If you are just using the Tax Reports only (& not the integrated BAS), fortunately the program recognises when sale/purchase tax codes have been used incorrectly & will still show the sale & purchase amounts in the correct sections. On the Tax Code Summary report, this will show the tax code with a -S or -P indicating the tax code has been incorrectly used on a Sale or Purchase.

The 2nd is the Item setup - When you create an Item that you wish to use on both purchase & sale transactions, it's very important to ensure you set up BOTH sides with the appropriate accounts:

If you're seeing double-ups, your issue is likely related to assigning the wrong account on Item setup. Luckily, you can correct ALL affected transactions by changing the account allocation accordingly! 😊

Lastly, the COGS account tracks how much you pay for Inventory that you eventually sell. It is automatically affected & adjusted when you sell an Inventory Item. This is why there are Tax Invoices under it 😁

Gitta

Hi Shaz,

this is how we have set it up:

I also think I have worked out how it works in Reckon Hosted:

When I look at the Inventory Asset Account only the Bills have NCG as the GST Code. The Tax Invoices have no code at all.

The COGS account has no GST codes at all.

When I look at the Profit & Loss Report in cash accounting the COGS is actually correct. It only shows what has been sold so far.

Hope this makes sense.

Gitta

Gitta's Bookkeeping & BAS Services

gittasbkbs@bigpond.com

Acctd4

Hi Gitta

As long as Bagged Products is an Income account, all is well there ☺️

Gitta

yes Bagged Products is an Income Account Shaz :)