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calwestmarineser
July 18, 2021
Question

Why do i have a negative cost of goods sold on my profit

  • July 18, 2021
  • 1 reply
  • 0 views
Also i do not have inventory i purchase parts for each job that i do...

1 reply

MaryLandT
MaryLandT
July 18, 2021

Let's check why you're seeing the Cost of Goods Sold (COGS) account is showing a negative amount, calwestmarineser.

 

There's a possibility that you're using an expense account when purchasing an item. You can click the COGS amount to bring it up the transaction and drill down the report.

 

Then, change the account of the item to an income account and make sure to update past transactions. Let me show you how:

 

  1. Go to Settings ⚙ and select Products and Services.
  2. Under the Action column of the appropriate item, select Edit.
  3. From the Income Account ▼ drop-down, choose the correct account.
  4. Select the Also update this account in historical transactions checkbox.
  5. Click Save and close.

 

Generally, COGS is affected only when you sell the items. This account isn’t meant for the items you use to create your products, such as raw materials. For in-depth information, please refer to this article: Understand Inventory Assets and COGS tracking.

 

To help calculate your profits and expenses properly, here's a guide: How to calculate and record COGS.

 

If you have additional questions about your COGS account on the report, please let me know. I'll be right here to help you.

    C
    calwestmarineserAuthor
    July 19, 2021

    Thank you so much for taking the time to answer my question. 

    So if I do not keep inventory on hand and purchase parts for each individual job how would you reccomend classifying my parts? 

    BettyJaneB
    BettyJaneB
    July 19, 2021

    Glad to have you back, @calwestmarineser.

     

    Let me provide some options that you can use in classifying the parts that you've purchased in QuickBooks Online.

     

    You can create and utilize the category to group items of the same type. However, if you'd like to be more specific, then use the sub-categories.

     

    Here's what you'll need to do:

    1. In the left menu, click Sales. 
    2. Go to the Products and Services tab. 
    3. Tap the dropdown More ▼, then select Manage categories.
    4. Choose New category and enter the name of the category. If needed to create a sub-category, pick Is a sub-category checkbox and the main category.
    5. Hit Save when done. 

    In this feature, you also have an option to pick a category when entering a new inventory product, service, or non-inventory product as well as adding an existing product or service to a category. 

     

    To learn more about this process, read this resource: Group your products and services into different categories.

     

    You also have the option to use the class tracking feature in QBO. This is only available to the Plus version. To utilize the feature, you'll need to turn it on then start categorizing the products and services from your transactions.

     

    To turn on the feature:

    1. Click the Gear icon in the upper-right corner and select Account and Settings.
    2. Select Advanced tab and go to the Categories section.
    3. Mark the Track classes box.
    4. Then, choose how you want to assign the classes.
    5. Click Save and Done.

    I've also attached some articles that you can use to help classify your products and services, as well as some information about class tracking:

    If there's anything else I can assist you with managing the items, you're more than welcome to reach out anytime. Have a great day!

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