Income Statement by Function of Expense

  • 21 October 2021
  • 4 replies

Hello everyone,


I am wondering how to handle the following problem:

Let's say I produce some finished products in a given month. After producing them, I immediately sell them.

After selling some of them, I receive an invoice for the electricity (just an example) that I want to classify as a production cost and I want to include it in my Income Statement by Function of Expense under COGS

I should allocate this costs (after the sale of some or all finished products) to sold finished products and to finished products that are not sold yet.

In my opinion, it is not possible to allocate costs to products that have already been sold. But I have to include these costs in Cost of Goods Sold.

How do I handle this?

Thank you in advance.

4 replies

Userlevel 7
Badge +11

Hi @Magdad1 


One can do an Inventory cost adjustment to add such cost to a ‘Finished product’ that is not sold yet. 

If the product has been sold, then as you pointed out, you may directly debit Cost of goods sold while processing the Invoice for electricity charges. 

Hope this helps,




Thank you a lot for your answer. Do you know how to do this in practice?
Suppose an invoice with energy costs is for 2,000 of which 1,000 should go to the COGS account and 1,000 should adjust the value of unsold finished goods. When I create the AP Bill I automatically create a transaction in General Ledger which debits my COGS account and credit AP account. I should write off the remaining 1000 from COGS in a separate transaction, but I am not sure how to combine this posting with the adjustment in the Inventory module.



Userlevel 7
Badge +11

Hi @Magdad1 

Are you using manufacturing module to manage production of finished goods ? 



Hi @vkumar,


Yes, I'm using manufacturing module.




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