Hi, dear Developers,
I have a Qn with regards to purchase of item. When i was trying to post a purchase invoice, i previewed my GL entry, it appears as follows:
Dr Inventory xxx
Cr Accounts payable (xxx)
Cr Direct cost applied account xxx <------ (1) this, my developer told me, is P&L account
Dr Purchase Account (xxx) <------ (2) my developer told me, it is an interim B/S Account
I'm quite confused, as from accounting prospective, (1) and (2) will hit my P&L and B/S separately, end result will be, (1) will reduce my Cost and, i'm understating my overall cost in P&L. (2) will understate my Liabilities in B/S.
I do not understand why should i have cost incurred when i'm purchasing the item only. My developer told me that (1) and (2) is offsetting with each other and it does not affect my book, but anyone with accounting knowledge would know, this will affect, only that my B/S will still be balance though...
My guts guessing is that, sth is wrong with my Product Posting Group setup. i feel that (2) should infact be a B/S Account as well...
So, i seek advice from here, how should it be.. i'm totally confused...