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T
TOM_G
February 7, 2023
Question

Inventory and COGS duplication

  • February 7, 2023
  • 2 replies
  • 0 views

I purchased an inventory item with my credit card. I expensed the cost to my INVENTORY asset account. Later, when I sold this item, I entered the item with this cost and selected the COGS account for the Expense account. This is how I did things with Desktop in the past but now with Quickbooks Online Plus the cost shows up in the COGS and in Inventory Shrinkage creating double the cost in my P&L. 

Can anyone let me know what I am doing wrong or how to fix this?

2 replies

Rubielyn_J
Rubielyn_J
Level 8
February 7, 2023

I'd be glad to help fix your inventory and COGS duplications in QuickBooks Online, @TOM_G.

 

If you're using QuickBooks Online Plus, you can use the built-in inventory feature instead of tracking inventory manually. To proceed, create an account to track your inventory value.

 

  1. Go to the Gear icon at the top, then select Chart of Accounts.
  2. Click New.
  3. Choose Current assets from the Account Type dropdown.
  4. Select Other current assets from the Detail Type dropdown.
  5. (Optional) Input a unique Name (system default will be Other current assets), Description, Default Tax Code, and Balance for the account.
  6. Click Save and Close.
  7. If desired, you can create an account for each type of inventory.

 

Then, create also an account to track your cost of goods sold. When you purchase inventory (using Checks, Expenses or Bills), use the asset account you created to track its value in the Account field. This "transfers" the money into the asset account, increasing the value of your inventory.

 

You can refer to this article for additional information about managing your inventory products in QuickBooks: 

 

 

Don't hesitate to post again if you need further clarification about this. I'll be standing by for your response. Have a great day.

T
TOM_GAuthor
February 8, 2023

Thank you for your quick reply but unfortunately I have already done what you suggested. I have been working with Quickbooks for 20 years. Quickbooks Online is creating cost duplication for sold inventory in my P&L since it shows up as Inventory Shrinkage and COGS.

AlcaeusF
AlcaeusF
Level 14
February 8, 2023

Hello @TOM_G,

 

We want to help you with your questions about the costs shown in the Profit and Loss report. However, we need more information about it to provide the correct resolution and to get this sorted out promptly.

 

Can you share with us how you expense the cost, as well as how you sold the items? This way, we'll be able to check why you're getting that outcome on your end. If you could provide some screenshots, it would greatly help.

In the meantime, you can check this article for additional guidance on using journal entries to correct accounts in QuickBooks: Create journal entries in QuickBooks Online.

 

Please know that you're always welcome to post questions in this space. Have a great day ahead. 

Rainflurry
Rainflurry
Level 11
February 8, 2023

@TOM_G 

 

If you use inventory items in QBO, and you have those items mapped to COGS and an income account under the item set-up, you don't need to make any additional entries to inventory or COGS when you buy and sell the items.  QBO (just like Desktop), does it automatically.  When you select an inventory item on a bill/check/expense transaction, QBO automatically adds it to inventory.  Then, when you sell the item on an invoice, it reduces your inventory and books COGS.  There are no entries that need to be made beyond that.  If you are making a manual inventory and COGS entry, it will do just as you descried - it will duplicate your COGS expense and reduce inventory again.

T
TOM_GAuthor
February 8, 2023

Thank you so much for following up on this. I am at a loss and trying to close out 2022.
I purchased the item in Oct 2022 with a credit card. I applied the credit card charge to my Inventory asset account.
I sold the item in Nov 2022 and credited the inventory item then. When entering the item I selected my Inventory account under Inventory asset account and entered the cost that I paid in Oct under Cost and selected my COGS account for the Expense account.
After I invoiced the item, my Inventory account was decreased by the cost however it was also increased by the Inventory Starting Value for the item and then decreased by an automated Inventory Qty Adjustment called Inventory Shrinkage. This corrected the value in my Inventory account BUT created a duplicate cost for this item in my P&L since the cost shows up there as both COGS and Inventory Shrinkage.

Rainflurry
Rainflurry
Level 11
February 11, 2023

@TOM_G 

 

I applied the credit card charge to my Inventory asset account.

 

I think that's where things got off-track.  When you bought the item with your cc, the item itself should have been selected under 'Item details'.  If you posted it to your inventory asset account under 'Category details', that doesn't add the item to inventory - it just adds the cost to inventory.  Then, when you sold it in November, presumably there was a quantity of 0 in QB, so QB made an automated adjustment to compensate because you can't sell an item you don't have in inventory.  Does that sound like what happened? 

 

At this point, you must have both an extra COGS entry and another offsetting entry to beginning inventory.  Is that what you're seeing? 

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