Bookkeeping,Taxation,Payroll and Accounting services in Nairobi/Mombasa

File you Annual Tax returns before June 2026,Get InTouch for assistance

For Bookkeeping services in Nairobi call us on 0725262426

For Tax service in Mombasa call us on 0700262426

Our Services

1) Accounting Services
2)Tax ,Services
3) Payroll Services
4)Company Registration
5)AGPO registration
6)NCA registration
7)Ifmis Registration
8)Change of Directors

Here’s a step-by-step guide + sample Chart of Accounts template for converting raw materials into finished goods and making them appear under Cost of Sales (COGS) in QuickBooks Online (QBO).

---

Step 1: Set Up Your Chart of Accounts

You need 3 key inventory accounts:

1. Raw Materials Inventory (Asset) – for all purchased raw materials.

2. Work-in-Progress (WIP) Inventory (Asset) – optional, for tracking semi-complete goods.

3. Finished Goods Inventory (Asset) – for completed products.

Also ensure you have:

Cost of Goods Sold (COGS) account – this is where inventory costs move when you sell finished products.

---

Sample Chart of Accounts (for Manufacturing)

Account Type Account Name Detail Type

Inventory Asset Raw Materials Inventory Inventory
Inventory Asset WIP Inventory Inventory
Inventory Asset Finished Goods Inventory Inventory
COGS Cost of Goods Sold Supplies & Materials
Income Sales of Finished Goods Sales of Product

---

Step 2: Record Raw Materials Purchases

When you buy raw materials:

Expense Category: Raw Materials Inventory (not COGS).

Example:
Bought raw materials worth KSh 50,000

Debit: Raw Materials Inventory – 50,000
Credit: Accounts Payable / Bank – 50,000

---

Step 3: Convert Raw Materials to Finished Goods

When you manufacture:

1. Calculate the total cost of raw materials used.

2. Use a Journal Entry:

Debit: Finished Goods Inventory – 50,000
Credit: Raw Materials Inventory – 50,000

(You can also include direct labor or overhead costs here if needed.)

---

Step 4: Selling the Finished Goods

When you create a sales invoice/receipt in QBO, select the finished goods inventory item.

QBO automatically reduces the Finished Goods Inventory and moves the cost to COGS in your P&L.

---

Step 5: Monthly Adjustments

At month-end, verify that the value in Raw Materials Inventory + Finished Goods Inventory matches your stock count.

If there is WIP, you can adjust:

Debit: WIP Inventory
Credit: Raw Materials Inventory

---

Kenyan Manufacturing Example

Suppose your business buys maize for milling:

Purchase: Maize (Raw Material) – KSh 100,000 → recorded as Raw Materials Inventory.

Milling cost (Labor/Overheads) – KSh 20,000 → can be journaled to Finished Goods Inventory.

After milling, total cost (KSh 120,000) is moved to Finished Goods Inventory.

When flour is sold, QBO posts the cost to COGS.

How to solve Additional assessment

Under Section 51 of the Tax Procedures Act, 2015 (Kenya), a taxpayer has the right to object to an additional assessment—such as for VAT—by lodging a notice of objection to the Kenya Revenue Authority (KRA) within 30 days of receiving the notice of assessment.

✅ Valid Reasons for Objecting to a VAT Additional Assessment under Section 51:

1. Incorrect Computation of VAT

KRA may have miscalculated VAT payable (e.g., using wrong rates, errors in arithmetic, or incorrect classification of goods/services).

2. Input VAT Not Considered

KRA might have failed to consider legitimate input VAT claims supported by valid E-TIMS or compliant tax invoices.

3. Mistaken Identity or Wrong Taxpayer

The assessment might have been raised against the wrong taxpayer PIN or entity.

4. Exempt or Zero-Rated Supplies Misclassified

KRA may have treated exempt or zero-rated supplies as taxable erroneously, leading to an inflated VAT demand.

5. Transactions Outside the Tax Period

KRA may have included sales or transactions that fall outside the period of audit or the specific return under review.

6. Duplicate Assessments

The same transaction or sales period might have been assessed multiple times.

7. Failure by KRA to Consider Submitted Returns or Records

If the taxpayer had already filed returns or submitted documentation but KRA ignored them.

8. Disputing the Legal Basis

The assessment may not be backed by proper legal authority or may misapply the law (e.g., misinterpretation of VAT Act or relevant Finance Acts).

9. Genuine Errors in the Taxpayer’s Return Already Rectified

If a self-declared error was already corrected through an amended return, but KRA still assessed based on the old return.

10. VAT Not Collected or Paid by Customer

For certain situations, if the customer failed to pay for the service/supply, and bad debt relief applies.

---

📝 How to Object (Summary of Section 51 Requirements):

Timeframe: Within 30 days from date of service of assessment.

Format: Written notice of objection (now done online via iTax).

Content: Must state precise grounds and be accompanied by:

Supporting documents (invoices, returns, ledgers, etc.)

Any tax not in dispute must be paid.

Response Time by KRA: 60 days; if no response, objection is deemed allowed.