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Profitability on sales in System Five starts from the category setup. During the category setup the 3-digit category code will determine the ledger codes for Income and Cost of Goods sold. The cost of the goods is set from the cost of the product brought in from during the PO receiving. During invoicing, the cost of goods is brought into the invoice as well as the retail price. The difference between these selling prices and the cost prices will determine the profitability.
Profitability calculation begin with the category setup which can be accessed through Setup Tools → Configuration → Category Setup.
Figure 1 shows a Main Category Setup with the ranges of Sub categories. Figure 1 - Category Setup Screen
The three digit category will dictate the Income and Cost ledgers. The default setup as show in Figure 2 will prefix a 4 to your category number for the income account and prefix a 5 for the cost of goods sold account. Figure 2 - Subcategory Setup Screen