Need advice of account entry

[moeleyva]

Hello I need help,

I just started to do account for a restaurant ( first time ) I don't know where to allocate the food the purchase for their restaurant business. I'm stuck between "Food Inventor (other current assets)" or "Food Purchase (cost of Good Sold)". I appreciate your help.

 

[Victor Shah]

You can account for Food purchase in both the manner. You can book it to Inventory or COGS.
There are additional accounting treatments you will have to follow in both cases.

1. If you record purchase to Inventory account then as and when you use the inventory in Kitchen, that much portion should be expensed out from inventory account. For this option, there should be a mechanism with the restaurant that how much did the chef consumed in the kitchen out of inventory.
2. if you record purchase to COGS account, at the month end or period end, there should be inventory adjustment out of COGS depending on what is the inventory on hand at the period end date.

 

[moeleyva]

You can account for Food purchase in both the manner. You can book it to Inventory or COGS.
There are additional accounting treatments you will have to follow in both cases.

1. If you record purchase to Inventory account then as and when you use the inventory in Kitchen, that much portion should be expensed out from inventory account. For this option, there should be a mechanism with the restaurant that how much did the chef consumed in the kitchen out of inventory.
2. if you record purchase to COGS account, at the month end or period end, there should be inventory adjustment out of COGS depending on what is the inventory on hand at the period end date.

Thank you very much! that definitely clears my mind.

 

[Victor Shah]

Thank you very much! that definitely clears my mind.

You're Welcome, Moelevya!