Why Include a Miscellaneous Inventory Account on Sale Code Setup

When creating a Miscellaneous Sale Code, you must include a Sale Account but have two options when it comes to the Cost of Goods Sold (COGS) and Inventory Accounts.

Option 1: Include a COGS Account on the Misc Sale Code

• How It Works: When a COGS account is included on a Miscellaneous Sale Code, a Miscellaneous Inventory Account is also required. When the Accounts Payable (AP) invoice is posted, you distribute the cost of the invoice to the Miscellaneous Inventory Account. This account temporarily holds the cost until it is recognized on the customer’s invoice. Once the customer’s invoice is posted, the Miscellaneous Inventory Account is relieved, meaning the cost is matched with the revenue on the invoice. This ensures an accurate profit figure.

Option 2: No COGS Account on the Misc Sale Code

• How It Works: When a COGS account is not included on a Miscellaneous Sale Code, the system only records the revenue from the sale on the customer invoice. The cost of the miscellaneous item is not reflected on the customer invoice.
• Considerations: This method may be used if you don’t know the cost of the item at the time of invoicing the customer. The cost would later be entered on the AP invoice, but it won’t be matched with the revenue from the sale, potentially leading to an incomplete profit picture.