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Community Explorer **

when entering a bill for inventory items and cost is different than before, it is posting difference into COGS

I am working in a client's 2019 Enterprise and several bills that she entered have a different cost than what is in her item list, so QB is posting the difference into COGS, even though she is entering the revised cost on her bill entry.  I don't know if she set up something wrong (highly likely) but I have never seen this before.  Is there a setting that is causing this?  

5 Comments
QuickBooks Team

Re: when entering a bill for inventory items and cost is different than before, it is posting dif...

Let me be the first to welcome you to the Community, Bethyde.


Thanks for being detailed about your client’s concern. This gives me a better overview why the cost is different and it’s posting to COGS.


Based on the information provided, there’s no specific settings that’s causing the amount and information to be off. QuickBooks Desktop uses the average cost method for calculating the value of your inventory.


Once a product is sold and new inventory is purchased at varying prices, the average cost also will change. QuickBooks pulls the cost of the product out of the Inventory Asset account and posts that amount to the Cost of Goods Sold account.


For more insights on how QuickBooks handles inventory, check out this article: Understand Inventory Assets and COGS tracking.


This should point you in the right direction. Let me know if you have additional questions about the product. I’ll be right here to answer them.

 

Community Explorer **

Re: when entering a bill for inventory items and cost is different than before, it is posting dif...

I understand how inventory works.  My question is:  why is the changed purchase price not being shown in inventory and the difference showing in COGS?  The item has not been sold, only received.  There should not be any COGS.

Highlighted
QuickBooks Team

Re: when entering a bill for inventory items and cost is different than before, it is posting dif...

Hello there, @Bethyde.

 

Allow me to join the thread and help share additional information about inventory in QuickBooks Desktop (QBDT).

 

When recording a bill and entering a cost on the item which differs from what was set up on the item list, QuickBooks will post an amount (the amount which is different from the item list) which debits to your material inventory and credits to your accounts payable. Please ensure that both the item/s was set up and the transactions are recorded correctly.

 

On the other hand, yes, COGS will just be realized when the item is being sold to your customer/s, in this case, transactions/bills created won't post to your COGS account.

 

You can see attached screenshots for additional reference.

f1 item.PNG

f1 bill.PNG

f1 transaction journal.PNG

If you have any other QuickBooks concerns in the future, you can check our self-help articles: Help articles for QuickBooks Desktop.

 

Let me know if you have any other inventory concerns, I'll always be here to help you. Have a great day ahead!

Community Explorer **

Re: when entering a bill for inventory items and cost is different than before, it is posting dif...

Okay I guess I am not making myself clear.  I understand how the inventory and COGS work - I have been a bookkeeper for 40 years and have used QB since its inception.  I have a client who is using 2019 Enterprise and when we enter a cost different than what is in the item list, it is posting the difference to COGS, NOT inventory.  So in your above example, when this item is purchased, it will show $15 in inventory, $15 in COGS, and $30 in A/P.  How do I fix this or is it a problem with 2019 Enterprise?

Moderator

Re: when entering a bill for inventory items and cost is different than before, it is posting dif...

Hi again, Bethyde,

 

I can help share additional information on how Cost of Goods Sold (COGS) and Inventory are posting into your Bills and Invoices in QuickBooks Desktop.

 

When you enter a Bill, QuickBooks records the transaction in your Accounts Payable account (credit) and debit the amount to the Inventory account. 

 

However, when you enter an Invoice, Cost of goods sold is affected only when you sell inventory items. You'd able to see the Sales/Accounts Receivable (debit) transaction and also see the Inventory/COGS transactions which credits the Inventory Asset account and debits the COGS accounts.

 

To further isolate the issue, I recommend checking the setup of your items. This is to ensure that your accounts are accounted properly.

 

If you have any additional questions, please let me know. Take care.