Hello all,
We are currently setting up business central dynamics for a trading organization. The business is simple, we purchase goods and sell them with a mark-up.
I have a lot of trouble understanding the line item "Changes in trade goods" or GL 8899. This line item is shown in the chart of accounts. In addition, it is part of "Income" in the revenue section of the profit and loss statement. This seems incorrect to me.
My questions:
1) how should I interpret the changes in trade goods?
2) And why is it shown as part of revenue/income in the profit and loss statement? This seems to be a double count.
I really need a detailed understanding of this line item in order to be able to explain it. This also means I would like to understand why this line item even exists, whether it is needed and whether it can be turned off.
I included example images below to show what I mean.
1: photo of chart of accounts - changes in trade goods = 542,391.80 = reflects all purchases made
Changes in trade goods increases when I post a purchase invoice. Cost of goods sold only increases with the same amount once the item is sold.
2: photo of chart of accounts - cost of goods sold = reflects value of items sold (COGS)
Total cost of goods sold is 496,565.60.
3: photo of chart of accounts - revenue
Total revenue is 664.261,90
Based on the chart of accounts, I expect the following for the P&L:
Revenue 664,261 -/- cogs 496,565 = gross profit of 167,696
If I print the profit and loss statement, changes in trade goods is included as part of income. See below.
Why would changes in trade goods be included as part of income ?
Why does it exist ? I think you only need: creditors and inventory, cost of goods sold and that's it. The changes in trade goods seems to be a double entry for inventory purchases. Including that as part of income seems to be completely wrong.
Please help me understanding this:)