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Charging departments in the same company

Forum|Forum|4 years ago
August 27, 2021
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I'm cleaning up my new employer's Quickbooks to better align with their reporting needs. They are currently using Quickbooks Pro 2019.

Basically, we have a Warehouse that sells to wholesale buyers and a Retail store for consumer sales. I know I'll need to use Classes to differentiate these two lines of business, rather than the two sets of every single account like they have now.

The Retail store orders most of its own inventory. Then there are some products where the inventory is transferred in from the Warehouse. Our Board wants to see these inventory transfers booked as revenue for the Warehouse and an expense to the Retail store, with the Warehouse essentially "selling" the Inventory to Retail at cost. Cash does not exchange hands; Retail is not expected to actually pay for the inventory; its all under the same company, same EIN

The net effect is zero on the P&L; but with a P&L by Class they can better understand Retail's profitability. So basically for the Warehouse, the Retail store is another customer; and for Retail, the Warehouse is another vendor. How do you transact this in Quickbooks under the same QB company file?

I found how to transfer inventory from one site to another using the Adjust Quantity/Values on Hand under Inventory Activities, and using Retail's inventory account as the Adjustment Account. But this only moves inventory, it wouldn't book an associated cost/revenue for each division.

I thought about creating a Vendor called "Warehouse Transfers Out," a Customer called "Retail Transfers In," and corresponding revenue and expense accounts. This would in a way record the transfers, and also the revenue/expense when I enter the Invoice/Bills. But the issue here is COGS would double; once when the inventory is "sold" to the Retail store, and again when the Retail store sells the transferred inventory. That, and I'm not sure how Warehouse's invoice to Retail, and Retail's bill from Warehouse, would ever get settled. I'd like to avoid using JE's as much as possible since I read that using them "breaks" inventory by messing up how Quickbooks calculates COGS.

I've looked online and cannot find anything about this except when inventory is sold to from one company to a related company, each with separate QB company files.

Thank you for any insight and suggestions.

QuickBooks Desktop

Best answer by AlexV

Hi Inilosnoc!

Thanks for joining us here and for the detailed post. Let me assist you with your inventory.

QuickBooks Desktop offers an Advanced Inventory feature so you can manage the products from different sites or locations at the same time. However, you're right, you can only transfer inventory but won't track the revenue and expense per location.

You'll want to continue the method of adding vendor and customer. Then, you'll want to seek some help from your accountant in creating a journal entry so it won't mess up your data.

In addition, another option you'll want to consider is by adjusting your inventory quantity. This way, you can decrease or increase the quantity of a certain product by department. For the detailed steps, please refer to this article: Adjust your inventory quantity or value in QuickBooks Desktop.

I've added some links you can check. These will help you in managing your inventories in QuickBooks Desktop:

Keep on posting here and we'll respond as soon as we can. Thanks!

AlexVAnswer