We have now started with the trading as a vertical in our company, where we buy goods from suppliers through the purchase order to purchase invoice withing erpnext and sales order to sales invoice for selling it to our clients.
Now at the problem is when I see profit and loss statement for whole year it shows me the different figure in Stock Expenses and my purchase register says different figure.
My Stock expenses says
Stock Expenses - HI 7380123
Cost of Goods Sold - HI 8609520.1
Expenses Included In Valuation - HI -1129657.6
Stock Adjustment - HI -99739.5
and my purchase register says Rounded Total 11347485.32
No I want some explanation like what is Stock Expenses, Cost of Goods Sold, Expenses Included In Valuation, and Stock Adjustments.
What I get it from my understanding is Stock Expenses(No clue), Cost of Goods Sold(Should be purchases), Expenses Included In Valuation (Not sure but it takes the whole gst amount ), and Stock Adjustments (These are some additional stock which is not purchased but added.)
Please consider me novice and explain me this.
I will be thankful to you.
As per the Perpetual inventory valuation, expense for the stocks items are booked when they are sold, and not when they are purchased.
Purchase Register is showing you all the purchases made in a given time period.
Cost of Goods Sold is value of items sold already. It could also include stock and non-stock items.
Expense Included in Valuation and Stock Adjustment are the temporary account. You should get the group total of Direct Expense. That will be more accurate Cost of Goods Sold. These accounts includes additional expenses incurred in purchases. But for most of such expenses, since Purchase Invoice is created separately, these accounts has negative balance, and you should check Direct Expense group total for more accurate COGS
Hi @umair thanks for the response.
I got your explanation but it seems the Expense Included in Valuation account ledger is full of GST Value and in the profit and loss statement this value is deducted from Cost of goods sold, and because of that my profit is Increased by that amount, and which is not the actual case please refer the below screen shot.
Now if I take the figures of Sales Register and Minus it from Purchase Register the Figures shows different value.
I assume this is happening because it is deducting the GST amount from the Cost of goods sold. Hope you understand my point.
Or in Simple way, Where I can get the total Purchase figure in P&L statement, because at the time of purchase I have paid the Base Price Plus TAX and I am not able to get that value, due to this my Profit is increasing on books which is actually not there.
Your reply is appreciated.
After doing some research I finally come found the answer and hope that it will help to understand the Accounts Novice like me ;).
I am framing my questions below and answering them as well.
- Where are total purchases? Because cost of goods sold shows me some different figure and purchase register shows me something different.
Ans: Both are right the cost of goods sold will only show you the goods which is there on Delivery Note which is against the stock in Hand, it means your total purchases is Stock in Hand + Cost of Goods Sold. So you need to check the Stock Balance or Stock Register Also.
- Why it is deducting the GST amount and Showing me Separately in Profit and Loss account under Stock Expenses.
Ans: As a perceptual inventory system it will show you only the actual amount of goods after removing taxes and any value addition, if you want that is to be added in total then you have to modify your Purchase Tax Template and Select the option on Total instead of Valuation and Total, but for me it was not required because in P&L statement the Sales amount which was shown was without considering any taxes.
Conclusion: In my case the problem was there were Some items which was different in Purchase and Same item name was different in Sales, because of that rest items was there in my stock in hand (this happened because here no body has followed the order I mean the purchase flow as well as sales flow), which I have to rectify, not it is showing me the correct figures.
Hope this will help someone.
Thanks to @umair for pointing perceptual Inventory.