Inventry or Purchase (Expense A/C)

[sadeedp]

When assigning the 'default expense account' in the Purchase Default tab of the Maintain Vendor window, can you use the Inventory G/L account number, or is this only for expenses?

Question 1- If I use expense & if I use Inventry A/C, how this will effect the Account?

Question 2- Also in the Maintain Inventory Items, if I select GL Inventory A/C as a "material Purchase-expense A/C instead of 'Inventry" A/C, is the maintain inventry become useless? Must I have to select this A/C Inventry only?

Question 3- My company purchasing so many spare parts & materials for service purposes. In which Item Class this will come

Regards,
sadeedp

[LauraG]

How you setup your default accounts depends on how you want to deal/track inventory. Setting your defaults only gives you basic info. Setting up your inventory items really determines the accounting.

There are 2 inventory methods-Periodic and Perpetual. I would suggest you read these 2 websites to help you determine which method you wish to use.

http://ccba.jsu.edu/accounting/PERPETUALPERIODICJE.HTML
http://acsas.uwinnipeg.ca/finacct/Chapter%20Six.htm

Under the Periodic method, all purchases of items sold get posted to a Purchase/COGS account. At year end (or more frequently), you do a physical count of your remaining inventory and an adjustment to COGS/Inventory is done so that your year ending Inventory is reflected on your balance sheet.

Under the Perpetual method, all purchases of item sold get posted to the Inventory asset account. When you sell an item, there are entries made to Sales, COGS and Inventory. At any point in time you know what your Inventory balance is.

As for your spare parts, I would suggest you use the periodic method and use the Non-Inventory Item and just inventorize them at the end of the year.

[sadeedp]

Thanks Laura for a greater advice. Really very informative..

Regards,
sadeedp