Software: MoneyWorks accounting software
You have an option of recording the invoice, payment or receipt transaction either via by account or by item tab. What’s the difference?
You use the ‘By Account’ tab to record transactions which charge directly to the GL (general ledger) such as rent, repayment of the loan, purchase of assets, etc.; or some time cost of goods sold when you are not using the accounting software to track the inventory.
Use the ‘By Product’ tab when you itemised the products and services. Itemised product save time in data entry as the item description filled up automatically when using it in the transaction. It’s unlike the ‘By Account’ scenario where you have to type the item description as and when you use it.
It updates the quantity on hand and debits the inventory asset account when the inventory item has purchased, it then debits the cost of goods sold when the sales invoice has posted. It gives a real-time inventory status when the itemised product has used.
It depends on the business requirement whether to use the ‘By Account’ or ‘By item’ tab to enter data. Itemise your product if you want to standardise the product description and better data analysis on the data which you have captured.