Trying to distinguish between an Expense and an Inventory purchase. When I set up a Vendor there is not Account selection for Inventory. How do I do this?

Thanks for choosing QuickBooks Online (QBO) to cater to your business needs, Jeff. I'd be delighted to help you purchase an inventory item.

The proper way to buy an item in QBO is by creating an inventory product and generating a purchase order (PO). After that, use the PO to create a bill. By doing so, QuickBooks will automatically increase the quantity on hand.

I'll lay down the step-by-step guide to achieve this and track the products accurately.

First, let's add the inventory item. Please note that this option is only available in Plus and Advanced. Consider upgrading your plan (if you have Simple Start or Essentials) to utilize this functionality.

Here's how:

1. To start, turn on the inventory tracking feature.
2. Once done, go to the Gear icon and select Products & services.
3. Click New, and choose Inventory.
4. Fill out the required details of the item (Name, SKU, Initial quantity on hand, As of date, and Reorder point).
5. Review and select the correct Inventory asset account.
6. Add the other necessary info (Description, Sales price/rate, Income account, and Sales tax).
7. Enter the Cost, Expense account, and Preferred Vendor on the Purchasing information.
8. Hit Save and close.

Once done, we can create a purchase order. Before proceeding, let's turn on the feature:

1. From the Gear icon, select Account and settings.
2. Select the Expenses tab.
3. In the Purchase orders section, select the Edit icon.
4. Turn on the Use purchase orders options.
5. Select Save and then Done.

Here's how to create a PO:

1. Go to + New and then select Purchase order.
2. Choose the vendor.
3. Enter the Purchase Order date.
4. In the Item details section, enter the products you want to purchase.
5. Hit Save and close.

Once your vendor accepts the purchase order, add it to an expense or bill to increase the number of products.

Furthermore, expense accounts track operational costs unrelated to sellable goods, while inventory accounts are assets that track the value of goods purchased for resale. When creating a vendor, only expense accounts are available to ensure accurate bookkeeping and prevent errors in financial records.

Finally, I've added these resources to help you set up reorder points to keep tabs on your items and run reports to see your best sellers, what’s on hand, the cost of goods, and more:

• Set up low stock alerts in QuickBooks Online
• Use reports to see your sales and inventory status

I'm here to help you again if you need additional assistance with the process or creating your sales transactions. Or would you like to learn more about other processes in QuickBooks? I'm with you every step of the way.