We have a small business and we used items which we had on hand - purchased long before the business started. So therefore no receipts etc.,
In order to invoice our customers I created a inventory part number Consumables. However, this was not correct because I had no cost attached to the part number and looks like we have made 100% profit on this item but there is still a actual cost attached and my net profit is overstated.
So therefore I would like to do a journal to allocate an amount to cost of sales (I know which GL code to use here) but am unsure whether I must debit or credit Cost of Sales/Purchases and which contra account to use. My inventory on hand for this part is zero.
Please can someone advise if I am on the right track and just to clarify on the steps.