If you set up your system for stock items, you need to create a Cost of Sales batch or journal in the Setup - System Parameters - Batch Types menu option if not already included in Set of Books. Once the Cost of Sales batch type is created, you need to link this batch in the Setup - System Parameters - Stock Information menu option. If you process Invoices, and update these Invoices to the Ledger in the Input - Update Ledger menu option, TurboCASH will automatically write up your Sales Journal with the Selling Prices and the write up the Cost of Sales Journal with the Cost Prices (Average or Latest cost). The Sales and Cost of Sales Journals will update the Ledger as follows:

1. Sales Journal - Selling Price - Transactions:
   
   
   
   
   
2. Cost of Sales Journal - Cost Price - Transactions
   
   
   
   

The Gross Profit for this transaction is R(£) 500 and is calculated as follows:

Sales	Sales Journal	Credit to the Sales account	R(£) 1 500
Less Cost of Sales	Cost of Sales Journal	Debit to Cost of Sales account	R(£) 1 000
Gross Profit			R(£) 500

Credit Notes have exactly the opposite transactions as that for the Invoice in the Sales Journal and Cost of Sales Journal.

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PLEASE NOTE

Cost Prices Latest Cost or Average Cost

Before you start to process and update any Invoices or other documents, you need to carefully plan and decide if you should use latest cost or average cost method. This will drastically influence your gross profit (Sales less Cost of Sales) and consequently the net profit. If you are not sure, which method to select, consult with your accountant.

TurboCASH defaults to an average costing basis. This means that if, when purchasing a stock item, the cost price has changed from the price you last specified, simply enter the new cost price. TurboCASH will then average the cost price for you (e.g. if you buy an apple for R(£)1.00 today and tomorrow you buy another apple for R(£)1.50, TurboCASH will calculate the average cost price to be R(£)1.25 per apple).

If you wish to use the latest cost price instead of the average cost price, you need to select the Latest Cost (Cost of Sales) in the Setup - System Parameters - Stock Information (Use Cost of Sales) menu option.

If you do not select Cost of Sales, TurboCASH will not update your cost of sales account and you will not be able to view the gross profit (Sales less Cost of Sales) on your sales transactions. If no cost prices are reflected in the latest or average cost for your stock items, the Cost of Sales account will be updated with a zero value.

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You need to take-on Stock Items (quantities and cost prices) in the Input - Adjust Stock (Take-on tab) if you start to use TurboCASH for the first time and / or update your purchases before you update your invoice documents in the Input - Update Ledger menu option. This will ensure that the correct cost prices are updated in the Stock Item master files and that the updated cost prices will be used when you update the Invoices or Point of Sales invoices.