Software: MoneyWorks #accounting software
What is a product?
In MoneyWorks, a product is an item which you buy from the seller and resell it to your customer. If you stock it, it will be treated as an asset and the stock value will be calculated automatically.
Assume a stationery shop purchase 100 unit of Pen A at $2 each from a seller. The Purchase Invoice debits the Stock on Hand (Current Assets) and credits the Accounts Payable. The stock value of Pen A is $200 ($2 x 100).
When 10 unit of Pen A has sold, the stock value dropped to $180 (90 x $2). The Sales Invoice debits the Accounts Receivable and credit the Sales account, and debits the Cost of Goods Sold and credits the Stock on Hand.
Now, if another 100 unit of Pen A has purchased at $1.60 each, the average cost of Pen A will change to $1.79 each.
Old stock: 90 x $2 = $180
New stock: 100 x $1.60 = $160
Average cost: (180 + 160) / 190 unit = $1.79 each
If you are not treating the product as a stock item, it debits the Cost of Goods Sold and credits Accounts Payable when a Purchase Invoice has recorded.