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sychan
October 24, 2020
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Pay a Purchase Order and update product cost (QBO)

  • October 24, 2020
  • 1 reply
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We just set up our business and we purchased products from suppliers and sell to customers.

 

We created the products (inventory item), issued a Purchase Order to supplier, Copied the PO to Bill, and arranged Payment.

However, only the qty is updated in the product master, but not the product cost (purchase value). 

 

Please advise if any additional steps to be done to update the product cost.  Many thanks in advance 

 

Best regards,

Jacky C

 

Best answer by JessT

hello @Jen_D 

thanks Jen for the explanations.

in future, when we purchase the same item at a different price, if I do not agree the way @JasroV advising to create another product (while the product still have stock qty), is there any way to work around?

 

we are unable to apply to QBO inventory and cost concept in our business.

this is making our operations extremely difficult.  I am seriously consider to stop using QBO since we just started the business.   please advise if there's any solutions.  Thank you so much

 

jacky c.


Hi Jacky!

 

Knowing how QuickBooks tracks your inventory cost is very essential in the business setting. Allow me to step in and shed more light on this.

 

In QuickBooks, the cost of the product is based on its rate at the time of purchase, not on its cost in the inventory list. Therefore, you won't need to update it every time you make a purchase.

 

In addition, QuickBooks uses the First In, First Out (FIFO) concept when tracking inventory costs. Let's say you bought 1 pen at $20, and then you add 1 more at $30.

  • When you sell one pen, your realized cost (Cost of Goods Sold) will be $20.
  • When you sell the remaining pen, your realized cost (Cost of Goods Sold) will be $30.
  • When you sell both pens at the same time (meaning in one receipt), you will have two values for COGS: $20 and $30. See the transaction journal of my sample sales receipt below.

    You can view the transaction journal of a sales receipt or any transactions by clicking More at the bottom and choosing Transaction journal.

To conclude this:

  • Your cost is based on the rate when you buy the item.
  • You won't need to update the product cost on your item list every time you make a purchase.
  • You won't need to create another item just because of the cost changes.
  • QuickBooks will automatically report the realized cost based on the FIFO concept.

If you still need more clarification about the cost of an inventory item, please let me know. Have a good one!

 

1 reply

JasroV
JasroV
October 24, 2020

Thanks for sharing details, @jacky C.

 

I’m here to guide you on how to update your product cost. You’ll want to edit the item from the Product and Services tab. Before doing so, ensure the quantity of the item is zero before adjusting the cost value. This way, it’ll not override the cost value of the previous item. 

 

Adjusting the cost value of the item while their still stock left affects the initial value of your inventory. This can cause discrepancies in your reports. In this case, I’d recommend creating another item at a different cost. I’d also recommend consulting with your accountant for additional advice on the best action to take.

 

Nonetheless, here’s how to edit your product and service item in your QuickBooks Online (QBO) account:

 

  1. Go to the Gear icon. 
  2. Select Products and services.
  3. Locate the product you want to adjust and click the Edit link under the ACTION column.
  4. Adjust the cost of the item then click Save and close.

You can also read this article for more information: Adjust inventory quantity on hand in QuickBooks Online.


Additionally, you’ll want to refer to this article on how you can manage and track your inventory effectively in QBO: Set up and track your inventory in QuickBooks Online.

 

Let me know if there’s anything else I can help you with about managing your inventory. I’d be more than happy to work with you. Keep safe.

S
sychanAuthor
October 24, 2020

@JasroV 

 

Hello Jasro, thanks for the prompt reply

May I summarize our previous actions in QBO

1. new start  business and no inventory in the beginning

2. created the product master with ZERO inventory, we did not enter a cost for the product

3.. created PO to purchase the product from the supplier with a specific price per item

4. copied the PO to bill

5. paid the bill

 

What the purchase cost is not UPDATED in the product.

What should be the CORRECT step to increase inventory qty with COST.

 

Thank you for your advice again.

Jacky

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