Sage 100

this is really not urgent, but I was asked - what account numbers go into ""Special Item COGS"" and ""Special Item Purchases"" that are found in Sales Order > Setup > Sales Order Options on the main tab. I read the help files and I can't see a significant difference in the two descriptions. My answer was to put the COGS account in both but I had no explanation of when on or the other would be used. Anyone have a clue when one or the other would be used? here is what the help files describe. **Special Item COGS** Enter the default general ledger cost of goods sold account number for posting the cost associated with the sale of special items that are not contained in the Item file. Click the Lookup button to list all general ledger account numbers. **Special Item Purchases** Enter the general ledger purchases account number for posting the cost associated with the sale of special items that are not contained in the Item file. Click the Lookup button to list all general ledger account numbers.

Is one specifically for ""Special"" Items - those that are not tracked in inventory? They start with a * ? to echo Brian, not sure if COGS is correct, because these items are not technically inventory

Typically, COGS is an item that is purchased and sold to customers. A PURCHASE is simply something that is used to run your business. So, you would most likely use an operating expense account for Special Item Purchases instead of a Cost of Goods Sold account. However, there is nothing wrong with using the same account for both.

In my accounting mind, the Purchases = Inventory and will be credited when the item is sold on a customer invoice. The COGS account will be the one that will be debited when sold.

What @RobertWhite said. And this only applies if there is a COST entered for that special item.

When an item is drop shipped, cost of goods sold or purchases GL account is debited when the PO receipt of invoice / dtr are updated. So, it seems the special item cogs is for SO invoice items and special item purchased is for drop ship purchases. I would use the same cogs GL account.

Actually, the special item is not just for drop-shipped. Any special item has to have some GL accounts for the normal Sales/IM/COGS trio any item normally has (including Misc Items, but NOT Misc charges), but the IM/COGS are only used if you input a cost.

I know special items are not just for drop ships.

Oops, I misread something, and I agree with @RobertWhite and @BethBowers. Those appear to be Inventory and COGS accounts for special items (non-stock) like you find in Product Line Maintenance for regular inventory items.

Since both of these accounts are found in Sales Order Setup screen and both are related to Special items. Are you saying that the difference is that PURCHASES is used when drop shipping a special item and COGS is used when it is not a drop ship?

I am thinking PURCHASES is used on the purchase order side (CAN be used when drop shipping a special item), and COGS is used on the SALES ORDER side. I haven't tested this but it seems logical (to me) LOL...

No, there is a Purchase Order Option setup for PO special items. This is called Purchases because they didn't want to call it Inventory, I guess, since these are not supposed to be inventory and it will screw up matching to your IM TB if you use the Inventory account.

OK I think the light bulbs may be lighting up finally. Sorry if I'm being dense about this. @BethBowers , you are saying that if we have a cost on the Sales order, the Purchases Account is credited and the COGS account is debited with that cost. if we use the same account there would be no affect on GL?

Winner, winner, chicken dinner!

That's correct Beth. PURCHASES in SO Setup doesn;t seem to have anything to do with PO. I just tested it. That makes sense (sort of). Since both of the fields David asked about are in SO setup it makes sense they pertain to sales order. I just ran a test and the PURCHASES field is credited during the SO sales journal / DTR (as if it would be relieving inventory). This seems very odd to me. If you can't inventory a special item when would it be necessary to relieve inventory?

WHEW! thanks for that - If Debit and Credit had been in the help files they would have actually been helpful. I guess if your Debiting COGS you have to have something on the Credit side.

I understand the COGS account for special item sales, but the only need I can see for the credit account (PURCHASES) is if there is a drop ship item and you want the no affect on the GL because the cost will be accrued during the PO receipt of invoice.

Seems like a good way to get your inventory account out of balance with the inventory valuation report. If you aren't inventorying quantities then you shouldn't be crediting inventory. The COGS should happen during the PO receipt of invoice on the special item.

Now that I understand it, I think the important thing is that you need to set the ""PURCHASES"" account in PO and the PURCHASES account in SO to be the same. Theoretically you did a PO for a special item and that GL account was debited when you Receipt of invoice. So when you sell the special item you would put the same unit cost in and SO will Credit that account

If you have purchased a special item on the PO side, you could use some inventory-ish account to hold it's value until you then do a SO to relieve it (by putting the cost on the line). (Non-Dropshipped, just a regular * item)

If you debit the PURCHASES account for a special item during PO receipt of invoice then it works. The end result is a debit to COGS and a credit to PURCHASES on the SO invoice and then a debit to PURCHASES and a credit to AP on the PO invoice.... Factors down to a debit to COGS and a credit to AP. Better be certain to use the same cost in PO and SO. Also very difficult to match sales and costs in the same period for cutoff if there are a lot of special items at the end of a period.

If you debit and credit the same account on the sales side, you may as well have the option to leave those two account fields blank so no entries are made at all. Then, the COGS would post to the GL only from PO receipts. It would seem there would be a lot less moving parts and less chance for misstated financial statements.