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#How to keep inventory in quickbooks accountant desktop how to

When you purchase an inventory part item, QuickBooks “remembers” how much you paid for the item and adds that amount to your inventory asset account. However, inventory-based accounting works the same, regardless of what your business practice is: But, in my experience, most contractors are either not selling the items at all or have a mix of selling items to service based clients and do not sell individual items to contract clients. Now, if you are a service-based specialty contractor, and you sell your inventory items to customers on an invoice or sales receipt, it’s not a problem. This is where it gets really tricky for Contractors because often times, you never sell individual items to your customers, but rather these costs are included in a lump sum billing.

In most inventory based businesses, you will use the invoices or sales receipts feature in QuickBooks to sell the items to your customers.

This is because of how inventory accounting works – when you purchase an inventory part, you are simply adding the cost of this item to your inventory asset, i t’s when you SELL the item that cost of goods sold happens. No cost for these items will show up on the job-cost reports or on the Profit and Loss statement at the time of purchase, even if you assign the items to a specific job. It’s important to know, though, that when you are purchasing these items, NO COST IS BEING CREATED. But, unlike most job-related costs, you must also enter the number of these items that you are purchasing in the quantity field.

You use the enter bills or write checks feature in QuickBooks to purchase the items from your vendors.

You set up each item that you sell in QuickBooks as an inventory item.

In logic, and in practice, inventory accounting in QuickBooks is extremely simple for true inventory based businesses who buy and sell individual products to their customers.

It’s different than entering your standard job-cost items, though, when you are using inventory parts. This never works with inventory, though, and you probably know by now that you will always use an item of some kind when purchasing job-related costs. What many people logically do when they record the cost of the products they sell is simply choose the cost of goods sold account whenever they pay a vendor for the products that they will be selling.

#How to keep inventory in quickbooks accountant desktop how to

What many people don’t understand about Cost of Goods sold and inventory accounting is how to arrive at a Cost of Goods Sold figure that makes your financial statement accurate and useful. It is, literally, the cost of the products that you sell. Most people understand the concept of Cost of Goods Sold – the name itself is pretty self-explanatory. And, unfortunately, this doesn’t always work well in the job-costing scheme of things. The catch for Contractors? If you don’t set it up and use it a certain way, your accounting will make about as much sense as an IRS manual.įirst, you’ll want to understand exactly how Inventory accounting really works, because inventory parts are a specific type of item in QuickBooks designed to handle it correctly.

QuickBooks can handle most inventory based accounting really well for businesses that buy and sell specific items to their customers. Here’s what you need to know about how inventory accounting works, and what you need to do in order to keep your inventory straight and get the inventory items to show up on your job-cost reports.

If you do job-costing in QuickBooks, and you don’t sell individual items to your clients, I recommend you avoid using Inventory Parts if at all possible.