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M
Mileage 2020
August 13, 2020
Question

Opening balance inventory JE error in HST (ITC)

  • August 13, 2020
  • 1 reply
  • 0 views

Hi,

 

I tried to post opening balance for inventory plus tax from statement of adjustments which we received when we bought Business.The issue I faced is that when I enter  below JE QBO enters  tax to HST payable default account( liability account) instead of  HST(ITC). The HST is not  payable but paid with purchase which we will be claiming to CRA as ITC.

JE as per statement of adjustments:

Dr Equipment

Dr Leasehold improvement

Dr Goodwill

Dr Cash

Dr AR

Dr Rent

Dr Inventory

Dr HST

Cr Loan

Cr Owners equity....

 

This doesn't seems right to me for inventory since I won't be able to track cost of goods sold...so I'm thinking of posting inventory as a bill in QBO to allows to put HST ITC in right account and create fictitious Bank account called owners contribution to pay bill ( inventory) without touching actually bank and  once everything is entered I can post JE to transfer oweners contribution account balance to owners equity( ultimately I paid for this)..I tried it on test company and since I post bill cost of goods sold shows on P&L and shows negative profit right now but I think as we start entering sale and sale receipt ( bundled entry from POS to QBO) eventually it will offset( we are tracking inventory outside QBO so I might have to adjust it at year end opening inventory+Purchase-closing Inventory=cost of goods sold and adjust Dr /Cr to account)...Is this right approach?

Also for AR I'm entering opening balance to each customer account even the credit on their account... Im not sure if I am on right path...:(

 

Please share your thoughts.

 

 

1 reply

LeithG
LeithG
August 14, 2020

Hi Mileage 2020:

 

When posting an opening balance entry, rather than tagging the inventory/assets with a tax code - use exempt/zero-rated, and post the tax manually instead.  When posting it against the tax account directly, you'll have the option to pick ITC as an option as shown in the attached screenshot.

 

Hope this helps!

M
Mileage 2020Author
August 14, 2020

Thank you your reply.

 

In attached file you have created inventory item( product line) which will show it in a balance sheet but my problem is that I am not tracking inventory in QBO so for that I have to use non inventory items..which will show in P&L ( COGS and Income) but what should I do with my opening inventory assets?It won't show up on balance sheet ... should I be setting up opening inventory using inventory assets to show on B/S and than setup non inventory for new purchase? If I do so how will I reduce inventory assets in B/S? Usually when you sell something COGS &s get recorded and inventory reduces in B/S..but with Non inventory I'm confused.. can we use both methods ( inventory &non inventory)? How it gets recorded and affect the B/S and P/L?

 

Please share your thoughts.

 

Thank you.

LeithG
LeithG
August 14, 2020

Hi Mileage2020:

 

Please take my advice with a grain of salt as I'm not an accountant, but here's how I would handle it.

 

Posting in the month prior to my opening, post any 'assets' (inventory) on to the balance sheet; in this way, you have a starting number of what your bought as part of the business and have a value for what the business is worth on its own.

 

In the following month, you can post reducing the inventory based solely on the goods used in that month, or you can expense everything, depending upon the bookkeeping method you're following for posting.  You would then of course have to undo this at the end of the month to back anything out of COGS back into inventory for unsold/unused inventory but if that's how you'll be doing it every month anyway, that makes the most sense.

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