On the Profit and Loss report it has Total income, then cost of sales which is zero then gross profit, then expenses.

What is the difference between cost of sales and expenses?

We are an architectural firm so I'm guessing we don't have cost of sales? Seems to me contractors would be in cost of sales.

Cost of Sales or Cost of Goods sold are accounts that track the expenses incurred in order to make an item or product sold. If you are not selling goods, then you can use straight expenses, therefore you would not need to have Cost of Sales accounts.

Thanks

I am an architect and GC and our company provides both services. We use cost of goods sold for materials, consultants (including our engineering consultants), reproduction, and other job costs. We enter the invoices as purchases and assign them to a job. Then we include them in our invoices as reimbursable charges with the agreed upon mark up included. I'm strictly a self taught accountant, but I have thought this was ok.

Donald

Cost of Sales (goods) is just a special expense account. It can be useful for some service businesses but it is not necessary. Depends on what you want to track and where. Usually, I suggest my clients to use COS if the relationship between it and the related sales account is fairly consistent, i.e. 20%± markup. If not, it is of less use. Depends on individual circumstances.