Very often, a company may also be using its own merchandise or
stock. There are several ways of recording the consumption of stock,
accountant should be aware of the implications of each method.
Analysis:
When a stock is used internally, 2 things happen:
a) Stock is deducted (reduced)
b) There is no money collected, and no debtors are created.
In Wavelet, we recommend the following:
METHOD A: INVOICE OUT THE STOCK
1) Create a customer account called "COMPANY USE"
2) Invoice the stock out
a) At cost price
b) At zero
c) At normal retail price
Users could choose to sell at whatever price they want, the impact on selling price will affect the following:
a) At whatever price, the cost of goods sold would be the same.
b) Selling at cost means gross profit will not be affected, sales are higher (boosted).
c) Selling at retail price means gross profit will be higher, but at the same time, expenses are also higher.
d) Selling at zero amount
would means it will reduce the Gross Profit, sales figure are not
affected, and expenses are zero (because everything is charged to Cost
of Goods Sold).
Since there's no money collected, when a user invoice out these
stock at a price higher than zero, no money is collected. User could
choose a specific cash book under (OTHER section) inside the CUSTOMER
-> SETTLEMENT. Normally, if the cash book is tied to a GL CODE that
of type "Expenses", then the expense account would be debited in the
Profit and Loss Statement, instead of cash/asset being debited for
normal cash sales or settlements.