I posted this message in the accounting.com forum but thought I would give it a try here as well seeing there is so many knowledgable people with managment skills.
I am trying to determine the best way to do my bookkeeping when I invoice a customer. I have an electrical business with no inventory. I have two items on my invoices which are Labor and Materials. I setup the Materials item so that it will add a credit back to my Job Materials which comes under Cost of Goods Sold. Let me explain this further in case anyone needs more clarification what I am asking. In my software program, my Labor linked to Schedule C "Services Income" which I have left alone. The Materials was linked to Income but I changed it to an expense as a subcategory of "Job Materials" which shows up under "Cost of Goods Sold". It shows up as a credit back to Job Materials when I run reports. I decided to charge the exact amount of the materials I purchase from the supply house without a markup. In my profit and loss statement it shows just the Services Income under Net Sales and the Materials is hidden under the Job Materials which comes under Cost of Goods Sold as a credit back to Job Materials. The COGS is deducted from the Net Sales which gives me the Gross Profit. So can anyone tell me if the way I have set this up is permissable or should I change the Materials back to an Income item which would be added into the Net Sales or not a refund or credit to my Cost of Goods Sold as I have it now? Any help would be greatly appreciated.
