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Archive for the 'Inventory' Category

QuickBooks Purchase Orders and Inventory QuickTip

Monday, May 28th, 2012

Options for Processing Inventory Transactions in QuickBooks

The Purchase Orders and Inventory options in QuickBooks are used to enable the inventory function and adjust settings for processing inventory transactions. First you must tell QuickBooks that you want to enable the inventory feature; purchase orders are automatically enabled with that action. Then, you can choose to have QuickBooks warn you if you attempt to issue a purchase order with a PO number that already exists. The third option in this section, when enabled, issues a warning about a lack of inventory, which is useful during customer invoicing. If you sell ten widgets but your stock of widgets is fewer than ten, QuickBooks displays a message telling you there’s insufficient stock to fill the order. You can still complete your invoice, but this lets you know to order more widgets immediately. To enable these options:

  1. Choose Edit | Preferences from the QuickBooks menu bar.
  2. Click the Items & Inventory icon on the left pane and then click the Company Preferences tab.
  3. Choose the Inventory And Purchase Orders Are Active option by clicking the check box.
  4. To enable the Warn About Duplicate Purchase Order Numbers and/or the Warn If Not Enough Inventory Quantity On Hand (QOH) To Sell option, click he appropriate check boxes.
  5. Click OK to save these settings.

 

QuickBooks Inventory Costing

Wednesday, December 28th, 2011

How to Analyze Inventory Costs in QuickBooks

As is typical at the end of the year, we recently received several messages from readers asking how to analyze QuickBooks inventory costs. All of our correspondents said they knew that QuickBooks does not track costs by FIFO or LIFO, but they were having problems rectifying their year-end inventory values (for tax returns) with a meaningful analysis of those costs. Many of the messages included the statement, "This doesn't add up correctly". Several accountants said they were trying to evaluate client businesses that were for sale, and couldn't present accurate monthly, quarterly, or yearly inventory analysis figures to potential buyers.

Here's the problem: QuickBooks computes the average cost over the life of the inventory item, not as a weighted average. Weighted average (which is the generally acceptable paradigm for accounting) means measuring and tracking costs for an accounting period (fiscal year for most small businesses).

To get a weighted average, you must customize QuickBooks reports that show your purchases and sales for the accounting period in question. Then export the reports to Excel in order to perform the calculations you need.

Businesses that have sophisticated inventory needs should not be using QuickBooks unless they can find a third party application that will help them track inventory the way they have to. QuickBooks was originally designed for service businesses, and even though Intuit added the ability to track inventory, the software does not track or report on inventory the way that accounting applications that are designed for inventory-based businesses do.

Understanding QuickBooks Inventory Adjustment Posting Accounts

Monday, December 19th, 2011

How to Set Up QuickBooks Inventory Adjustment Accounts

We've published several articles about posting inventory adjustments. QuickBooks automatically creates an inventory adjustment account in the Expense section of the chart of accounts, but many accountants prefer to use an adjustment account that is a Cost of Goods Sold account. QuickBooks issues an error message when you post adjustments to a COGS account, but you can select the option to stop displaying the message.

On a slightly different issue regarding inventory adjustments, several readers have written to say they're confused about the number they see after they post their year-end inventory adjustments. These readers all ended up with more inventory than the quantity shown in QuickBooks when they finished their physical count. They found the negative number that was displayed on the Profit & Loss report confusing and wanted to know if they'd done something wrong.

If your inventory adjustment increases inventory, that's a reverse expense (both Expense accounts and COGS accounts are expenses) and will contain a minus sign. Of course, if previous adjustments had produced a reduction in inventory, the amount you see is the net.

If you want your reports to be clearer, create two QuickBooks subaccounts under your Inventory Adjustment account: Inventory Loss Adjustment, and Inventory Gain Adjustment. Always post to one of the subaccounts; don't post to the parent account. If the parent account currently has a balance, do a journal entry to move the balance to the appropriate subaccount. The parent account will show the net amount, which could be a negative amount, but the numbers in the subaccounts will explain that.

Note that QuickBooks recommends an Income account for adjustments that increase inventory and an Expense account for adjustments that decrease inventory. Don't do this – it's the quintessential definition of "records and reports that will confuse you". Your inventory adjustment information should be in one place in reports, and you should always be able to see a "net" amount.

 

QuickBooks How to Include Shipping in Item Price

Friday, November 11th, 2011

QuickBooks – Using a Group Item to Include Shipping

Several readers have asked how to include shipping in a QuickBooks item price in a way that doesn’t show shipping as a separate line on the sales transaction form. They want their P & L reports to show the item income and shipping income separately.

You can do this by creating a Group in QuickBooks. For example, create an item (Gadget, with a price of $10.00, linked to an Income account for sales) and create an item for shipping (Shipping, with a price of $2.00, linked to an Income account for shipping). Then Create a Group Item named Gadgets, with a price of $12.00. Use the Group in your sales transactions.