Setting up Sage 50 Canadian as either a

Periodic system (Beginning Inventory + Purchases - Ending Inventory = Cost of Goods Sold)

or a

Perpetual System (COGS is calculated on each Sales invoice)

is fairly straightforward, BUT

Transitioning from Periodic to Perpetual is not easy! (in the real world, where we can't just shut down the business, set up everything, then start back up)

Yuvina said:

The COGS account in Inventory is linked to my Purchase account in G/L so this now distorts my Purchases as the COGS on each sales invoice is added to the Purchases

Yuvina said:

the total COGS would include the cost price on each sales invoice which would have already been reported in the Purchases - is this correct?

Just as you had to adjust your COGS in prior years because of your year end count, by the end of this transition year you will want to do an inventory count and two major adjustments:

- An Inventory Adjustment to correct the quantities and value of your inventory to match up with a full physical count, or a series of shelf counts and adjustments.

And, once you're satisfied that the inventory list is more-or-less correct:   (aim for perfect, but don't wait 'til you get there!)

- a G/L adjustment to get the G/L inventory balance and inventory list to match up.  The 'other side' of the adjustment should be to the former 'Purchases' (now COGS) account.   Because you can't 'just post' a dollar amount to the linked G/L inventory account, there is a procedure in the Knowledgebase to make the adjustment, and any sage Partner with the Accountants' Edition software can open your books, make the adjustment, and send them back to you.

 For the linked accounts, if you are not allowing negative inventory you can leave the 'Variance' inventory account number blank. 

Yuvina said:

debited Inventory and credited Purchases so now the Purchase report is showing a decrease of $34,000.00 + for October

During the transition period you will have to make a lot of inventory and accounting adjustments:

 - If the adjustments to inventory (adding = debiting) were due to a physical count, and made to a new Inventory G/L account you have to decrease the old inventory G/L account to match the estimated uncounted inventory (and when it's all counted, there is zero, so the old g/l account should be zero.

 - If you are using the same inventory G/L account as before, it is now 'linked' so you have to go through a more complicated process to make the inventory adjustment.   In the end, all your inventory will be accounted for in a inventory list that matches the G/L.

It might help to look at this transition like a major home renovation.  During the process there's a lot of dust and noise and stress, but when it's all cleaned up and completed it's much better than the old stinky bathroom.  

Setting up Sage 50 Canadian as either a

Periodic system (Beginning Inventory + Purchases - Ending Inventory = Cost of Goods Sold)

or a

Perpetual System (COGS is calculated on each Sales invoice)

is fairly straightforward, BUT

Transitioning from Periodic to Perpetual is not easy! (in the real world, where we can't just shut down the business, set up everything, then start back up)

Yuvina said:

The COGS account in Inventory is linked to my Purchase account in G/L so this now distorts my Purchases as the COGS on each sales invoice is added to the Purchases

Yuvina said:

the total COGS would include the cost price on each sales invoice which would have already been reported in the Purchases - is this correct?

Just as you had to adjust your COGS in prior years because of your year end count, by the end of this transition year you will want to do an inventory count and two major adjustments:

- An Inventory Adjustment to correct the quantities and value of your inventory to match up with a full physical count, or a series of shelf counts and adjustments.

And, once you're satisfied that the inventory list is more-or-less correct:   (aim for perfect, but don't wait 'til you get there!)

- a G/L adjustment to get the G/L inventory balance and inventory list to match up.  The 'other side' of the adjustment should be to the former 'Purchases' (now COGS) account.   Because you can't 'just post' a dollar amount to the linked G/L inventory account, there is a procedure in the Knowledgebase to make the adjustment, and any sage Partner with the Accountants' Edition software can open your books, make the adjustment, and send them back to you.

 For the linked accounts, if you are not allowing negative inventory you can leave the 'Variance' inventory account number blank. 

Yuvina said:

debited Inventory and credited Purchases so now the Purchase report is showing a decrease of $34,000.00 + for October

During the transition period you will have to make a lot of inventory and accounting adjustments:

 - If the adjustments to inventory (adding = debiting) were due to a physical count, and made to a new Inventory G/L account you have to decrease the old inventory G/L account to match the estimated uncounted inventory (and when it's all counted, there is zero, so the old g/l account should be zero.

 - If you are using the same inventory G/L account as before, it is now 'linked' so you have to go through a more complicated process to make the inventory adjustment.   In the end, all your inventory will be accounted for in a inventory list that matches the G/L.

It might help to look at this transition like a major home renovation.  During the process there's a lot of dust and noise and stress, but when it's all cleaned up and completed it's much better than the old stinky bathroom.