Australia Posting of Material Purchase for Metal Fabrication Business.

[faisal]

I am reaching out regarding the chart of accounts for purchasing materials in my metal fabrication business. We regularly purchase materials such as SQ Tube, REC Tube, metal sheets, flat bar, angles, pipes, round bars, etc., which are used in manufacturing customer customizable orders.

To efficiently track these transactions, I would appreciate your guidance on the appropriate chart of accounts to use for purchasing these materials. Specifically, I am looking for accounts that will help us accurately record and monitor our inventory levels, as well as track the cost of goods sold for these materials. The software is XERO.

 

[DrStrangeLove]

The chart of accounts isn't a good way to track inventory levels or cost of goods sold. The chart is meant for reporting financial information, not tracking inventory. Your chart needs enough detail to give actionable financial information, but not so much detail that your statements bog the reader down with detail.

I'd suggest using a separate database to track inventory levels. In the inventory item profiles, include purchase cost and other inventoriable costs per item/piece/unit that you would ascribe to COGS. That will let you create both detail and summary reports on goods sold and purchased each period. And that will let you post journal entries for changes in inventory and COGS, plus track returns to you, returns to vendors, et al.