I have a feeling that the COGS component of our P&L is incorrect in Reckon Accounts Hosted.

Antonia Quinn

When I click on it to take a closer look, I can see that COGS is made up of not only Bills from our Suppliers (Trade Creditors) but also Tax Invoices from sales to our Accounts Receivables.  For example, I can see where we sold 48 items to our customer but only had 36 of them in stock so on the next line of the details of the report I can see a bill from our supplier for 12 more items.  This means that a total of 60 items has been accounted for in the COGS report that I just ran.  How can this be correct?  I tried phoning Reckon for assistance and was told that I would need to export my data to excel and manually adjust it.  Surely there is an easier way of fixing this....  Thanks!

Larissa Hicks

Hi Antonia,

Do you use Items (as in Lists>Item List)?

If so, I believe your problem will be in the mapping of the items

I would try clicking into one of the transactions that is incorrect and find the item it is allocated to, then go to your Item List, find that Item and double click on it.

See where transactions to this item are allocated to by what general ledger code is in the drop-down box beside "Account".

You can change this account (in single-user mode) and when you click ok, it gives the option to make the change to all previous entries. This will fix your problem but may cause issues for your accountant if the file has been used for a period of time. If they are newer items recently set up, then this is a quick-fix to move all the incorrectly allocated transactions.

Good luck

Antonia Quinn

Hi Larissa,

Thank you for your quick reply.  Yes we use Items.  If I click on an individual item it has COGS Account set to 'Cost of Goods Sold' on the Purchase Information side and on the Sales Information side it has Income Account set to 'Sales'.  Which "Account" are you referring to?

Thanks again!

Larissa Hicks

Ok, thought it might have been a quick fix. Do you have many Items in your Item List?
Another option is to have separate items for your Sales and COGS? That way they shouldn't end up in the same account.
That's all I can think of to help with your problem. Sorry, but don't know what else to suggest

Linda ABC

Hi Antonia - I am assuming that for the Item setup of these items - the 3rd account allocation - which is the Asset account - you have selected your stock on hand account?

When you look at the Bills you speak of that you can see when you zoom in on the COGS account - have the bill total been allocated to Items?  or have the bills been allocated direct to the COGS account?

The way that inventory items are designed to work is:

• Items are setup with an income account, a COGS account and an Asset account.
• when purchasing the item via Bills - you should use an Item code and this will apply the debit to the Asset account - which is your stock on hand.
• Then when selling the item using an Invoice - the sale value goes to the income account, and then in the background of the invoice - the cost value of the item will be credited to the Asset account and debited to the COGS account
• The purpose of all the above is to ensure that the value of stock on hand sits in the balance sheet, until the item is sold - and only then is the stock value reduced and the COGS account value increased.

so, once you have setup your items correctly, then you need to ensure that you enter your Bills using the item code and not allocating directly to the COGS account, thereby double up the amounts.

One of the discussions I have with clients before embarking on Inventory control processes, is... "do you have the time and diligence to do this correctly?"..."are you happy to pay your staff to enter Bills item line by item line to manage your inventory"...  as we all know, garbage in equals garbage out... so its definitely worth considering whether you get the value you need for all the extra effort it takes to do this properly... 

Some clients dont want to enter the bills item by item... so what you can do in that instance is... setup your inventory items like this... Make both the COGS account AND the Asset account - the same...(usually the COGS account)... this means that you would then enter the bills directly to a COGS account with no specific item or quantity tracking.. and when you process your invoices, the usual part of the entry that debits the COGS and credits the Asset will actually cancel each other out, so no double ups.. BUT... you will have no inventory control using this method and will need to manually value your stock at the end of the year/period and enter a journal between COGS and Stock on Hand asset to get your accounts correct.

Hopefully this all makes sense?

Antonia Quinn

Hi Linda,

Thank you for your reply.  Yes the third account allocation is 'stock on hand' in the item set up.  All of our bills are allocated to items as we need accurate data on all stock on hand in our warehouse.  I know what you mean about it being time consuming entering all lines by item code but our staff are very diligent and the inventory control is working well. I just have an issue in the way that the COGS is being calculated as it keeps doubling up and this is throwing out the P&L.  Our accountant at the time set up Reckon for us but clearly one of the accounts that the P&L is tracking to is incorrect and I don't know which one.  I have tried tracking back but haven't been able to locate it.  Quite frankly it is sending me mad!!

Perhaps this is one of those things that you would need to take a close look at directly to figure out.  I am waiting to hear back from our current accountant but their office is closed due to COVID-19.

Thanks again
Antonia

Linda ABC

No worries Antonia - if you want to email me [email protected] - we can arrange for me to have a look at the file and see if I can quickly pinpoint where its going wrong? cheers Linda.

Gitta

Hi All,

I totally agree with Antonia. I have the same problem and the Reckon Hosted Reports are very confusing, when there is Stock control used:

When I look at the P & L the COGS is completely out, which also give a false bottom line at the Profit and Loss!

When I look at the Inventory Assets, this is where the items are going when they are purchased looks also wrong and has negative numbers which troughs the Balance Sheet out.

.... but when I ran the BAS Detail Report all is correct!!!!

Can anyone shed a light on this or show me a better way to do things, so that the P & L and Balance Sheet have the correct figures. My clients wants to have the stock control.

Thank you for your time.

Gitta Yelds

Acctd4

Hi Gitta

The COGS account is a running balance account that is automatically adjusted each time a sale is made.

After you enter a sale (eg a Sales Receipt or Tax Invoice), RAH adjusts your COGS by multiplying the Item quantity sold by the average cost of each of those Items.

In summary:

• Inventory Asset (Account Type = Other Current Asset): This account tracks the current value of your inventory. RAH creates this account automatically when you set up your first inventory Item.
• Sales Income (Account Type = Income): This account tracks the income from the resale of inventory Items.
• Cost of Goods Sold (Account Type = Cost of Goods Sold): This account tracks the cost of Items you have sold. On the P&L, RAH subtracts the total COGS from your total Income to provide a Gross Profit before Expenses. Again, RAH creates this account automatically when you set up your first inventory item.