COGS Income Account/Expense Account Question

2 replies
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I am a small electrical contractor and am trying to set up my QBO account.

A couple of questions, all a bit related.

1) I purchase materials for projects, paying taxes at the time of purchase, and then bill them at cost. I am somewhat confused as to what income and expense account to assign the materials to. Am I correct in assuming they would go to the COGS on chart of accounts? If so, do I assign them to an expense account (Job Materials)?

2) If I do have some stuff I keep stock on, such as boxes, receptacles, etc.. and am interested in keeping track of that in inventory, where do I assign them for an income and expense account?

QuickBooks Online

Rustler

Level 15

I suggest you create in the chart of accounts, an account titled "Cost of Sales" it would be a COGS TYPE account.

Things you pay for that is related to a job and not stocked post to that account.

COGS, at tax time, means the cost of items sold that were in inventory. So for inventory type items the accounts are
asset = inventory asset
expense = COGS
income = Sales or product sales (an income type account)

SwitchedAuthor

Thank you for the reply.

So just to clarify and make sure I understand correctly. For items that I do not stock I would create a new account in my chart of accounts. It would be a "Cost of Goods Sold" account type. It asks for a detail type, so I would choose "Supplies & Materials"? Then I can just name it "Cost of Sales" or "Cost of Material Sales"?

As to the items stored in inventory I would choose an "Asset" type account. Then under the detail type I would choose "Inventory", and I could name it "Truck Material Stock" or something.

Then when I enter an inventory product it gets assigned to the "Truck Material Stock" asset account. The income account would be "Sales or Product Sales" and the expense account would be "COGS".

I think I understand it now, and appreciate the feedback!

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