Hi, I am a functional consultant for an ERP software and have not accounting background but got some training in finance. My question might seem stupid but I need to clear this confusion. Scenario: In fiscal year 2019 I have purchased an item from vendor that have direct unit cost as $100 and an indirect cost as $20. After posting this transaction following are the general ledger transactions that I get: Income Statement accounts as: Purchases(Dr) : 100 Direct Cost Applied Retail(Cr): 100 Overhead Applied Retail(Cr): 20 Balance Sheet accounts as: Accounts Payable(Cr): 100 Inventory Direct Cost(Dr): 100 Inventory Indirect Cost(Dr): 20 Suppose in 2019 this item remain unsold and then I am closing my income statement so I have these $20 on my income statement. Is this correct ? because as per accounting principles we can only have cost for items when they are sold. So should we need to transfer it to some balance sheet account before closing income statement or is this fine. This indirect cost is that type of cost that needs to be added to inventory value. Any answer will be highly appreciable. Thanks
