Before you start populating your inventory system, you need to decide which G/L accounts will be used. We need two accounts:
- An account for tracking what has been spent on inventory. This is an asset account that is reported on your balance sheet.
- A Cost of Goods Sold (COGS) account. The cost of goods sold is tied to a company’s inventory because it indicates the price a company paid to sell goods to its customers. A company’s cost of goods sold is reported on the income statement.
Because these accounts will be control accounts, we first need to add them as Shared Standard Accounts. To do this, navigate to [d] General Ledger, then [w] Set Up, then [e] Shared Account Entry.
All shared accounts are listed.
These are accounts that can be used as a starting point for each set of books your company manages within Abio. The new inventory accounts will be control accounts, meaning Abio automatically posts inventory to these accounts. They will need to exist in each set of books that posts to Inventory.
Inventory Accounts
The first two letters of the G/L account indicate where it is reported on the Balance Sheet. In this company, Statement Group ’10’ is being used for Current Assets.
We can create an inventory account that is prefixed with statement group 14 – Prepaid Expenses.
For Costs of Goods Sold, we’ll use the Income Statement Group ’64’, Inventory COGS.:
The account number starts with ’64’, indicating it should be reported under Inventory in the Income Statement.
Mapping Shared Accounts to Books
Abio let’s you choose which shared accounts can be used in which books. While you want your accounts to be consistent across all sets of books, you might not need them to be identical. Make your new inventory G/L accounts available to the appropriate books. To do this, Click on the 4th tab of the Shared Account Entry screen, ‘Account-Book’ and select the books that can use these accounts.
Click Apply to save your changes.
Creating Fiscal Year Records for each Book
Now you can add this G/L account into your set of books. If you are set up to have a standard G/L, you can do this by navigating to [d] General Ledger, then [a] Account Entry, then tab 4. New Acct. Both new accounts will be listed.
Select both accounts and click <Apply> to create the new accounts in your current set of books.
If your company isn’t set up to have standard accounts across all sets of books, you can use the ‘A’dd action to add the new accounts.
Financial information is stored for each G/L period and fiscal year on these records.
Recording Control Accounts
Now that we’ve set up our inventory G/L accounts, we need to tell Abio to use them when inventory is bought and sold. Navigate to the Control Account Entry screen. Enter [d] General Ledger, then [w] Set Up, then [f] Control Account.
On the third tab of this screen, under the General Ledger heading, there are two inventory fields.
Use the ‘C’hange action to record the accounts created for this purpose.
Now, when you purchase inventory, the G/L will default to the inventory control account. In this case, 140500.
When a sale is recorded for inventory, the sale amount will be posted to the inventory cost of sales account, in this case 640100.