Difference Between Initial Cost | Default Purchase Price | Default Sale Pri

While creating an item, there are different fields:

Initial Quantity On Hand:
Specify the item quantity you have with you as on the selected date. Suppose you have started using Book Keeper on 1 Apr 2018. You must be having stock in hand, say you have 500 quantity of item1 left, you need to type that 500 here.

Initial Cost/Unit:
Specify the per unit rate of the item. The current value of per unit of item should be entered here. This is ideally the average purchase price without including tax. In above example,you had 500 quantity of item1, you need to tell the rate of those quantity. This has no link with Default Purchase Price.

Value:
Book Keeper automatically calculates the value by multiplying the above two fields. This value is reflected as Opening Inventory in Profit & Loss statement and other financial reports.

Default Sale Price:
It is the rate at which you will sell the item. This price is automatically fetched when you select this item while creating an invoice. Whenever item price changes, you should edit this item and change Default Sale Price so that all further invoices will fetch this new price.

Default Purchase Price:
It is the rate at which you will purchase the item. This price is automatically fetched when you select this item while creating a purchase. This has no link with Initial Cost/Unit. Also, this price doesn't have any impact on Balance Sheet and other financial reports.

Does it affect the profit also?

No, Default Purchase and Sale price doesn't affect the profits. Let's understand it with the help of example.

1. Create a new company
2. Create one item there, say: Television
(Enter default purchase price: 1000, default sale price 2000 rs)
3. Make one purchase, it will show you 1000 rs as prefilled rate, however you can change rate. Let's say you have changed rate to 1100
4. Now make one sale, it will show you prefilled rate at 2000 rs, however you can change it, let's say you have changed rate to 1500 rs
5. Now if you check profit, it will show you 1500-1100 = 400 rs.