How does Pocket record inventory?

When you make purchases from your vendors for raw materials, ingredients, or even finished goods, these costs should be categorized in Pocket to the account, "Inventory Asset." These purchases are recorded to the Inventory Asset account and increase your inventory balance. 

When you sell your product, COGS is recorded based on your COGS % rule [See the article "How does Pocket record COGS?"]. This COGS entry also reduces your inventory at the same time, by that COGS amount. This recognizes the fact that you have less inventory on hand now that you've sold some of it.