Some users might have a hard time getting started with Inventory and Services module in Sage 50. Today’s blog will review basic some information about that module.

Inventory and services module is used more commonly to keep track of physical items, services or on more advanced versions (Premium and Quantum) is used with time slips to record billable or payroll hours. Our focus today will be on the most common use: keeping track of items.

How is inventory level changing?

During an inventory item creation process you will see that on Linked tab Asset and Cost of Goods Sold (COGS) accounts are mandatory. That is necessary for cost calculation purposes. On the same tab, I will recommend linking Revenue and Variance accounts also. That way Sage 50 knows which accounts should be used automatically when posting any transaction for that item.

Inventory quantity on hand can increase or decrease depending on the transaction posted. Inventory level will change when:

-          Buying using purchase invoices,

-          Selling using sale invoices,

-          Adjusting using Inventory Adjustments & Transfers window.

Cost of Goods Sold

In Inventory module, the program allows you to create either Items or Services. The cost of goods sold (COGS) is automatically calculated during item sales. There are no COGS calculated for Services.

A question I get quite often is how does Sage 50 Canada calculate COGS?

The short answer is that it uses the inventory costing method available in the program. There are two main inventory costing methods available in Sage 50 Canada: Average costing and First In First Out (FIFO).

On Sage 50 Pro version Average costing is the only costing method. On Sage 50 Premium and Quantum you can choose between the two methods. To make a selection, click on Setup, Settings, Inventory & Services, and Options.

A third method called Specific Cost can be used on Quantum version only. It tracks individual inventory items that have a serial number.

Choosing inventory costing method will have an impact on your books. Usually it depends on the company industry. If you are not sure which inventory costing method to choose, please contact an accountant or controller.