Chapter 33
Why does my profit jump at the end of the month?
Because the cost of what you sold arrives once, when you close the month. Until then your sales carry their price and not their cost, so the figure reads high — and the close is what makes it true.
The cost of goods sold is recognised in a single entry when you close the month, not sale by sale. So a profit figure read mid-month counts the money coming in and not the goods going out, and it drops to the truth when the month closes.
What is actually happening
Every sale you make records what the customer paid. It does not, at that moment, record what those particular goods cost you. That figure is worked out once, for the whole month, when you close it — one entry that moves the month's cost of goods out of stock and into cost of sales.
So an income statement read on the twentieth shows most of a month's revenue against almost none of its cost. It is not wrong about anything it has been told; it has not been told the cost yet.
Why it is done this way
No business asks the sales counter what its cost of goods was. It asks whoever keeps the books, who works it out from what the warehouse counted and what the accounts say. Recognising a cost at the instant of every sale is the opposite of that, and it means holding the same figure in two places and requiring them to agree every second of every day.
Doing it once a month removes the requirement instead of policing it. There is one authority — what is actually on the shelves — and the books are brought into line with it, deliberately, on a day you choose. It is the ordinary practice in this part of the world, and neither Turkish nor Iranian law asks for the alternative.
You approve it, and you can check it
The close does not just happen to you. Before it, the system shows the figure it intends to recognise and the two positions it came from, so a number you are being asked to approve is a number you can look into.
It is the change across that month, not a running total — otherwise each month would inherit and re-charge every earlier month's cost, and twelve months would not add up to the year. Months are also closed in order, which is what lets the figure be a simple difference.
A month with nothing to recognise still closes
A month with no movement, or a chart with no stock account at all, recognises nothing and closes anyway. That is a real outcome and it is reported as one.
The exception is an account the close needs and cannot find: there it refuses, names the account, and leaves the month open. A month that locked with no cost in it would be permanently empty and nothing would ever come back for it.
If you never close a month
Then your income statement never carries any cost of sales, and your gross profit reads as your revenue. That is the real cost of skipping it, and it is worth being blunt about.
There is a way to read honest figures in the meantime, and it is on the reports themselves: the balance sheet and the income statement can be drawn from your stock records instead of your books, and on that setting the figures are already correct whether or not the month is closed. The page says which of the two it used. Use it if you are behind — and then close the months.
Why the home screen does not jump
The profit tile on your dashboard is worked out from stock movements rather than from the books, so it does not wait for the close and it does not jump. It will therefore disagree with a books-based income statement for most of the month, and agree with it again afterwards.
That is correct rather than a fault. A home screen is not the place to be asked which basis you want; it answers the question a shopkeeper means when they glance at it.
What the product does not do
It never closes a month for you. There is no automatic month-end, by design — only you know when a month is really finished, when the last delivery has been entered and the last till counted. The system reminds and does not act.
And months cannot be closed out of order, so a forgotten month has to be dealt with before the ones after it. That is the practical reason to keep up: one missed month is five minutes, and four missed months are four closes in sequence with the figures all moving underneath you.