The last part of the inventory process is transacting the inventory costs to the G/L. This is when we create the transactions that update the G/L as illustrated below.

How to Account for Cost of Goods Sold (with Pictures) - wikiHow

Accounts Payable Purchases

Invoices for inventory are debited to the inventory account, and credited to accounts payable.

To demonstrate this, let’s post an invoice to inventory. We’ve purchased 10 jackets at $100 each.

When we transact this invoice, the purchase and the PST are credited to the inventory account, the purchase is debited to the A/P, and the GST/HST is held in trust.

[a] Payables | [p] Cost to J/C and G/L

Manual Transfers Into Inventory

We can also record inventory manually, by recording a transfer in.

[i] Inventory | [b] Transfer In

When we transfer in, we get similar ledger entries, without the tax considerations.

Inventory is credited, the source G/L is debited.

Recording Inventory Sales in Accounts Receivable

When an A/R invoice is generated from an inventory transfer, Abio scans the available inventory and selects the oldest items to move out. The price of those items is the amount moved out of inventory. Our current inventory of jackets stands at 60, from 2 purchases and a manual transfer in:

We draw 50 out:

We initiate the ‘Invoice Transfers’ utility:

And create an invoice for the jackets:

The new invoice is recorded on the transfer that initiated it:

To record the inventory transfer in the G/L, we transact the A/R, which selects 20 jackets from stock purchased on September 25th for $150.00 each, making $3,000.00.

It makes up the balance of 30 jackets from a purchase on September 26th, at $80.00 each, for a total of $2,400.00.

It posts a debit G/L transaction for $5,400, the original cost of the 50 jackets, to the inventory account.

Second Example

In this example we restock 100 hardhats at $10 each:

Which updates the G/L:

And then deploy 20 of them to a job for $30 each.

Which reverses the 20 helmets out of inventory at $10 each, or $200, and increases revenue at $30 each for 20 helmets, or $600.