Types of Accounts and Line Items
It's hard to determine where transactions should be recorded in the business' books. From our meetings with entrepreneurs, here are a couple of the most common:
Cost of Goods Sold: the costs that can be linked directly to the production of what the business sells. Examples:
The supplies a restaurant uses to make its dishes
All of the material used to make a handbag
Inventory: an asset that is intended to be sold in the ordinary course of business.