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cityautogroup
November 15, 2018
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We are a used car dealership new to using quick books online. I want to account for buying cars from the auction in my banking section of quickbooks. How should I categorize this?

  • November 15, 2018
  • 5 replies
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These vehicles are then reconditioned and sold.  How do I account for the expenses incurred for the reconditioning of vehicles-tires, paint, brakes, etc.  Business Expense? Misc. expenses?

Best answer by Regina_Lend_A_Hand_Accounting

Create an Asset account for "Used Cars" and book the vehicle purchases here (Balance Sheet).

The "reconditioning costs" of the vehicle are a "Cost of Goods Sold" Expense. You can create a sub-account to cost of goods sold specifically for these costs such as "Reconditioning - Used Cars". You can also create a "Cost of Services Sold" account for your actual "Used Car Retail Sales" (fees related to buying the used car) expenses. If the vehicle is put into physical inventory (still an asset) and it declines in value month-over-month it should be written down to the current fair market value.

5 replies

Regina_Lend_A_Hand_Accounting
Regina_Lend_A_Hand_AccountingAnswer
November 15, 2018

Create an Asset account for "Used Cars" and book the vehicle purchases here (Balance Sheet).

The "reconditioning costs" of the vehicle are a "Cost of Goods Sold" Expense. You can create a sub-account to cost of goods sold specifically for these costs such as "Reconditioning - Used Cars". You can also create a "Cost of Services Sold" account for your actual "Used Car Retail Sales" (fees related to buying the used car) expenses. If the vehicle is put into physical inventory (still an asset) and it declines in value month-over-month it should be written down to the current fair market value.

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Soheil
April 3, 2019

If the vehicle is still in inventory and not sold, why would we record its reconditioning cost under a "Cost of Goods Sold" account? Doing that would not reflect what is actually going on month to month regarding the costs of inventory sold and its reconditioning costs, Instead you would be getting what you sold + all the reconditioning you did for any car (currently in inventory or sold). 

 

What I did is I created an additional "Other Asset" account called "Inv. Reconditioning". I book all the reconditioning costs to that account, and when I book a sale, the reconditioning costs associated with that vehicle go from that account to the COGS "Reconditioning Costs" account.  

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Ernest9
November 8, 2022

I was wondering what you wound up doing in this situation? I am in a similar position & my current solution seems kind of clunky. Currently I have a separate inventory account for each vehicle, add the purchase expense and all reconditioning expenses to this inventory account as they are accrued. Once the vehicle is being sold, I make a fake expense to create an *inventory item* for the vehicle, credit the previous inventory account for the exact amount to "zero" the account, enter the amount as the purchase price for the new inventory item, & use that inventory item on my invoices. All this just so that I can track profit margins on vehicles & only move the expenses into COGS when the vehicles are sold. There has to be a better way. From what I have read online, it seems QuickBooks Desktop has an "assemblies" function that *may* work better for this but I need a solution for QuickBooks Online as that is what we are using.

vpcontroller
vpcontroller
December 21, 2019

QuickBooks Online Projects for Used Car Auto Dealership – Used Car Inventory

Helpful article link and download Chart of Accounts (COA) template

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DebitzandCreditz
March 3, 2020

@cityautogroup please contact me. I am a retired Controller of New Car Dealerships and working as an accountant for Used Car Dealers. I would like to see if I can be of assistance to you.  [removed]

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esarmiento
July 28, 2020

Hola, buenas tardes.

Nosotros actualmente tenemos Quickbooks desktop y vendemos vehículos, es decir, somo un dealer. Mi pregunta es la siguiente:

Como puedo mantener un inventarios de vehículos dentro de un mismo ITEM LIST, en donde yo al usar el numero del serial me registre el costo exacto de ese vehículo y no me promedie el costo del vehículo al facturarlo o venderlo?. Tambien he usado la opción de tildar el FIFO, pero, como es de lógica, me asigna el costo del vehículo que primero entro y no el costo exacto del vehículo. Lo que necesito en realidad es que cuando yo facture el ITEM LIST el costo sea el que se cargo a ese vehículo y no un FIFO o un average. Lo que no quiero es crear un ITEM por cada vehículo ya que se vuelve bastante engorroso y poco practico.

Se que esto no tiene nada que ver con el tema, pero quien pueda ayudarme se lo agradezco.

Muchas gracias de antemano por su pronta respuesta.

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Ernest9
December 9, 2022

The best way I have found to do this is create a "Other Current Assets", detail type "Inventory" Account for each vehicle. This will be a Work In Progress (WIP) Inventory Account. Post every expense for the vehicle; purchase price, reconditioning costs, landing costs, auction fees, etc., anything to do with the vehicle (gas is its own separate account) to that account. These are ALL inventory expenses.

 

When you are ready to sell the inventory & not add expenses to the vehicle's inventory cost, move the entire cost amount of the vehicle from the WIP inventory account to an inventory item. Do this through a dummy expense or check in which you will "purchase" the vehicle into an inventory item. You can make/use a fake vendor called WIP2Finished Inventory or whatever you would like. You will need to create an inventory item for the vehicle now if you have not already, you can do this on the fly within the expense/check. While creating the inventory item, leave the "initial quantity on hand" at 0. You are just adding a named & trackable inventory item that you can handle transactions with.

 

Back in the "expense" or "check" you are filling out, the "amount" for the inventory item will be the amount you have accumulated into the WIP Inventory Account for the vehicle. You will make another line under the "category details" with the same information, only the number you put in "amount" will be NEGATIVE and the account affected will be the WIP inventory account for the vehicle. The end total at the bottom of the expense should be $0. After you finish this transaction, the Work In Progress inventory account for the vehicle should also be empty.

 

Once all of this is completed, you can add the vehicle to a sales receipt or invoice, and QuickBooks will move the inventory amount into whatever COGS account you set during the creation of the inventory item. I would also advise setting the Work in Progress Account to "inactive" to reduce your total account usage since many QBO plans have an account limit. If you later find another expense/receipt for the vehicle that you didn't know of before moving the inventory expenses from the WIP account, I would just add it straight to the COGS account for your vehicle inventory. QuickBooks won't track the margin 100% accurately for that vehicle sale as a result, but it's easier than undoing everything to fix.

 

 If anyone has a better way to accomplish this, please let me know so I can make my life easier.

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