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arkvalleyinfo
October 16, 2018
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What expense account do I enter my inventory purchases off my credit card? Also which category would you enter shipping charges/fees under?

  • October 16, 2018
  • 3 replies
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There is no cost of goods sold on my version of online quickbooks.

Best answer by Rustler

@ stacey

inventory is only in QBO+, if you have plus, then COGS will show up in the chart of accounts when you enable qty tracking (inventory) in company settings

Other wise as Malcolm stated you have to use periodic inventory if you have essentials

There are two ways to do periodic inventory, choose one and stick with it, you can not mix and match

1. (my preference) Create an asset account called purchases and post all purchases of item for resale to that account.  Periodically, weekly, monthly, etc value the inventory on hand, subtract that value from the amount shown in the purchases account and do a journal entry for the answer to the subtraction
debit COGS for that value
credit purchases for that value

OR

2.  Post all purchases to COGS.  Periodically, but at least at the end of the year, you value the inventory on hand and do a journal entry.
debit the asset purchases account for that value
credit COGS for that value

Print the P&L
then reverse the journal entry
debit COGS for that same value
credit the asset purchases account for that value

This last journal entry, moves the value of what was on hand at the end of year back to COGS so the cost will be counted against the new year sales.


3 replies

Rustler
RustlerAnswer
October 16, 2018

@ stacey

inventory is only in QBO+, if you have plus, then COGS will show up in the chart of accounts when you enable qty tracking (inventory) in company settings

Other wise as Malcolm stated you have to use periodic inventory if you have essentials

There are two ways to do periodic inventory, choose one and stick with it, you can not mix and match

1. (my preference) Create an asset account called purchases and post all purchases of item for resale to that account.  Periodically, weekly, monthly, etc value the inventory on hand, subtract that value from the amount shown in the purchases account and do a journal entry for the answer to the subtraction
debit COGS for that value
credit purchases for that value

OR

2.  Post all purchases to COGS.  Periodically, but at least at the end of the year, you value the inventory on hand and do a journal entry.
debit the asset purchases account for that value
credit COGS for that value

Print the P&L
then reverse the journal entry
debit COGS for that same value
credit the asset purchases account for that value

This last journal entry, moves the value of what was on hand at the end of year back to COGS so the cost will be counted against the new year sales.


    M
    Malcolm Ziman
    October 16, 2018
    "Create an asset account called purchases "  - this is not generally accepted usage.
      I have not heard of Purchases being an asset account.  It is a COGS account. It shows on the P&L not on the balance sheet.  "Inventory" is the name of the asset account.  
    The word Purchases is a dynamic word, while the word Inventory is static. So the value for Purchases is a measurement over time. The value for Inventory is at one moment in time. The values on the P&L are dynamic and the B/Sheet is static.
      F
      fgabby1
      January 31, 2022

      I agree, the term Purchases is not an asset account. It's part of COGS

      M
      Malcolm Ziman
      October 16, 2018

      If you don't want QBO to track inventory you can debit a COGS account called Purchases for all inventory purchases, and shipping in.  Then at month-end or year-end whenever you want to produce financial statements, you would do an inventory count and create a journal entry where you adjust between a current asset Inventory account and a COGS account called "Change in Inventory", so that the asset account shows the inventory value at cost as per the count (the change in inventory value between the current and previous period end - could be positive or negative)

      vpcontroller
      vpcontroller
      October 16, 2018

      TIP:

      If you're adopting "Periodic Inventory" method do not select "Inventory as Detail Type" in the Chart of Accounts. Instead use Other Current Assets for detail type and for the category type also select the same. For the name, you never want to use "Inventory Asset", this happens to be default account name designated for perpetual inventory tracking in QBO. If you want to switch later, it creates problems.

      "Purchases" name on the B/S (as suggested by Rustler) works fine.

        M
        Malcolm Ziman
        October 16, 2018
        Purchases is not a B/S account
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