Accounts Defer Cost of Sales
Table Of Contents
Overview
All new Khaos Control systems are configured to use Deferred Cost of Sales by default.
This feature allows you to review and validate Cost of Sales (COS) figures before they are posted to your nominal accounts and Profit & Loss (P&L). It helps prevent inaccurate cost postings, particularly during implementation or when stock values are still being established.
For example, if stock values have not yet been entered correctly, posting Cost of Sales automatically could result in inaccurate profit figures. Deferred Cost of Sales gives you the opportunity to review and correct stock values and overheads before financial postings are made.
For more information about managing your system during implementation, refer to the documentation provided as part of your Go Live process.
How Deferred Cost of Sales Works
When Deferred Cost of Sales is enabled, Khaos Control does not automatically post Cost of Sales values to the nominal accounts when a sales invoice is issued.
Instead:
- Sales invoices are posted as normal.
- Cost of Sales transactions are held back.
- Cost of Sales is reviewed and posted separately at a later stage.
- You can verify and adjust stock values and overheads before posting.
This gives greater control over financial reporting and helps ensure the accuracy of Cost of Sales figures.
Benefits of Deferred Cost of Sales
Using Deferred Cost of Sales allows you to:
- Review Cost of Sales figures before they affect the accounts.
- Correct stock values before postings are made.
- Adjust overhead values where necessary.
- Improve the accuracy of Profit & Loss reporting.
- Reduce the risk of incorrect Cost of Sales postings.
Impact When Deferred Cost of Sales Is Enabled
Cost of Sales Is Not Posted Automatically
When sales invoices are issued:
- Sales values are posted to the accounts as normal.
- Cost of Sales values are not posted automatically.
- Cost of Sales is posted separately using the Deferred Cost of Sales process.
Sales Reports Display Estimated Values
Sales Orders, Sales Summary reports and related screens continue to display an estimated Cost of Sales value.
These estimates are based on:
- Stock Value
- Overhead Value
recorded against the stock item at the time the invoice was issued.
Because these are estimates, they may differ from the final Cost of Sales values that are later posted to the accounts.
Once Deferred Cost of Sales has been processed and posted:
- Sales Orders are updated.
- Invoice values are updated.
- Sales Summary information is updated.
Important Notes
Stock Controlled and Non-Stock Controlled Items
Both of the following are included on the Deferred Cost of Sales report:
- Stock-controlled items
- Non-stock-controlled items
Drop-Ship Items
Both stock-controlled and non-stock-controlled drop-ship items are included.
The Cost of Sales value for a drop-ship item is taken from the Stock Value held against the stock item record.
Pack Items
If pack child items are not printed on sales orders using the Don't Print Child Items option, the stock value must be entered manually on the pack header stock item.
Zero Value Entries
Entries with a Cost of Sales value of zero are automatically marked as Excluded.
These entries:
- Cannot be posted.
- Do not require any financial posting.
- Are excluded to prevent unnecessary build-up of zero-value records.
Excluded Items
When any valid item from an invoice is posted through the Deferred Cost of Sales process:
- Any excluded items from that invoice are automatically removed from the report.
Average Price Paid Method
If you disable Deferred Cost of Sales while using the Average Price Paid stock valuation method:
- Purchase invoices posted before Deferred Cost of Sales was disabled will not be included in future stock value calculations.
Care should be taken when changing this setting on a live system.
Generating the Deferred Cost of Sales Report
The Deferred Cost of Sales report is accessed through the Invoice Items Awaiting COS Postings screen.
This report allows you to review outstanding Cost of Sales items before posting.
For detailed instructions, see:
Posting Deferred Cost of Sales
Once you have reviewed and verified the Cost of Sales values:
- Generate the Deferred Cost of Sales report.
- Review the outstanding entries.
- Make any required stock value or overhead adjustments.
- Post the Cost of Sales transactions.
For detailed instructions, see:
Related Articles
- How To: Enable Deferred Cost of Sale
- Basic Deferred Cost of Sale Example
- How To: Understand the Deferred Cost of Sales Process
- How To: Generate and Analyse the Deferred Cost of Sales Report
- How To: Post a Deferred Cost of Sales
See Also: