if a advance received for business where will be record and why inventory items cost indicates in over head

An advance received for business should be recorded as a liability under a designated liability account for customer advances or unearned revenue, Damith.

This is because the payment is made before the business has delivered the goods or services, creating an obligation to the customer. To manage this, you can set up a deposit or retainer. The amount received is recorded as a liability since it belongs to the customer until it is applied to the services you deliver. Once you invoice the customer and receive payment for those services, the liability is then converted into income.

Here's how to create a liability account/record a retainer or deposit:

1. Go to Settings, then select Chart of accounts.
2. Click New.
3. From the Account Type dropdown menu, select Current liabilities.
4. From the Detail Type dropdown menu, select Client Trust Accounts - Liabilities.
5. Enter a Name for the account.
6. Select a Default Tax Code, enter an Unpaid balance, and an as of date.
7. Select Save and Close.

For the next steps in setting up a deposit or retainer process, refer to this article: Record a retainer or deposit.

Regarding your second question, inventory item costs may be included in overhead because they contribute to the overall Cost of Sales (COS) and are part of the expenses incurred to maintain inventory, including storage and handling costs. This inclusion helps in accurately calculating profitability.

It's also important to ensure that the expense accounts linked to your inventory items are correctly mapped to maintain accurate financial reporting.

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