QuickBooks Inventory Management
QuickBooks allows you to manage your company’s inventory and create reports for the related inventory when needed. Upon making an inventory purchase, the inventory item will be classified as an asset. As your company sells an inventory item, the cost of that item will be accounted for as an expense and the expense account that will be used is called Cost of Goods Sold. In the following chapters, you will learn how to add new items to your inventory. To learn how to manage your inventory in QuickBooks, follow the instructions in the following tutorials.
Lesson 8-1: What is An Inventory Item? – An inventory item is a good that a company holds and expects to sell during its normal business operations. This includes items that are manufactured, assembled or purchased for the purpose of selling to customers. The inventory that a company plans to sell to its customers will be tracked and it should be classified in Quickbooks as an inventory item. However, there are some items that are not purchased for the purpose of selling to customers and will not be tracked. These items are usually low in value and are used when performing a job. If your company has such items, you may want to classify them as non-inventory items in QuickBooks.
What is the difference between an inventory item and a non-inventory item?
In short, the primary difference between a non-inventory item and an inventory item is that you will keep track (count) of the inventory item, but you will not a keep track of the non-inventory item, and most non-inventory items are low value items. When an inventory item is created in QuickBooks, there will be a field that allows you to enter and track the quantity of the item(s) that a company has on hand. When a non-inventory item is created, there will not be a field to keep track of the non-inventory items.;
- Example of an Inventory Item: Joe’s Landscaping has purchased three-dozen of red roses for the purpose of selling it to their customers. Joe’s Landscaping will hold the roses and classify them as inventory item until a customer purchases the item at a later date.
- Example of a Non-Inventory Item: Joe’s Landscaping purchases a special type of decorative paper to place around the vase that holds the roses. This item is low in value and is it not tracked. It will be entered into QuickBooks as a non-inventory item.
An inventory item is not an expense at the time of purchase. When a company purchases an inventory item, it is listed as an Asset in the chart of accounts until it is sold. When the inventory item is sold, the asset account is decreased and the expense account is increased. The name of the expense account that is increased when an inventory item is sold is called Cost of Goods Sold. Throughout this chapter, I will show you how to track and manage inventory in QuickBooks Pro 2013.