Distribution codes are a quick method of specifying the revenue, inventory, and cost of goods sold general ledger accounts to which you post data from sales transactions.
You can define as many distribution codes as you need to represent the various combinations of general ledger accounts to which you post sales data.
If you create an item list, you can use distribution codes to assign account numbers to items when you create item records.
You can also use distribution codes if you do not use an item list. In this case, each distribution code identifies only a general ledger revenue account. When entering non-item transactions, you can either select the appropriate distribution code or select the number of the revenue account to use.
You also assign a distribution code to each invoice detail you enter in a recurring charge record.
Inventory and Cost Of Goods Sold Accounts
If you will assign a distribution code to an item record and you want to create transactions for inventory, and cost of goods sold, enter numbers for all three general ledger accounts (revenue, inventory, and cost of goods sold).
If you will use the distribution code for creating summary invoices (invoices that do not use item numbers for invoice detail entry), enter the general ledger account number only for the revenue account. Accounts Receivable does not create transactions for inventory and cost of goods sold from summary invoices.