My first exposure to Income Statements (dubbed P&L in this case) was in
the restaurant industry. Many of those businesses also put COGS as a
'top line' expense.
But note, it was never part of the Income section. The organization was
something like:
Revenue
Gross Sales
Discounts & Allowances
Net Revenue
Cost of Goods Sold
Labor & Salaries
Gross Profit
Other Expenses
EBITDA
Interest
Income Tax
Depreciation
Net Profit
The Income section ended at Net Revenue. COGS & Labor were top-line
expenses for several reasons but the main two were to have them stand
out since as the largest controllables, and to isolate the remaining
expenses for the owner to focus on the rest as 'fixed costs'. (though
many of them were of course somewhat controllable) EBITDA was what
management focused on as their 4th target. (Gross Sales, COGS & Labor
being the other 3)
What you see above, and what you seem to be looking for is a P&L used in
'Managerial Accounting'. There are other forms of this same report used
in other industries. For example, some are organized by Department or
Cost Center.
But in any case, the organization of the Chart of Accounts does not
change to match presentation. Accounts don't magically switch from
Expense to Income simply because you want to move them around on the
report page. Accounts belong where they do because of the nature of what
they are recording.
Regards,
Adrien
On 12/9/23 5:40 AM, Eric Chapman wrote:
Thank you, Adrien.
I knew it was a presentation issue, and was trying to figure out how to
present it correctly and yet be able to use GnuCash as I *wanted* to :)
I also realize the importance of the inventory accounts and the theory
behind this. I just know that the amounts and number of transactions are
minuscule at this point, so I was trying to cut corners. Maybe not a
good move. Second smiley :)
I was surprised that GnuCash limits the user's ability to debit an
income account from the Accounts Payable section, so I guess that was
where I scratched my head and wondered… No biggie. I suppose that
feature is intended to prevent inadvertent debits to income accounts,
which I can understand. I can deal with that limitation (feature) in
GnuCash. And I may just go back and re-do those few transactions with
inventory accounts.
I agree that COGS is an expense account. But as far as I know it is
either usually or always presented in the income section of the Income
Statement, not in the expense section. I would have thought, though,
that the "Income" or "Expense" attribute would be irrelevant to *where*
something is presented: *I expected the parent-child hierarchy of the
Chart of Accounts would control presentation*. I only marked the COGS
accounts as "Income" after finding out the parent-child hierarchy is
*not* the deciding factor in presentation, since I perceived that the
"Income" attribute would put them in the income section of the Income
Statement. I'm sure it makes sense from a programming perspective since
the storing of data under the hood should not be determined by possible
reporting desires. I probably won't put in the effort to learn Scheme –
as much as I'd like to. Not enough time available for the benefit.
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