Opening balance inventory JE error in HST (ITC)

Hi Mileage 2020:

When posting an opening balance entry, rather than tagging the inventory/assets with a tax code - use exempt/zero-rated, and post the tax manually instead.  When posting it against the tax account directly, you'll have the option to pick ITC as an option as shown in the attached screenshot.

Hope this helps!

Thank you your reply.

In attached file you have created inventory item( product line) which will show it in a balance sheet but my problem is that I am not tracking inventory in QBO so for that I have to use non inventory items..which will show in P&L ( COGS and Income) but what should I do with my opening inventory assets?It won't show up on balance sheet ... should I be setting up opening inventory using inventory assets to show on B/S and than setup non inventory for new purchase? If I do so how will I reduce inventory assets in B/S? Usually when you sell something COGS &s get recorded and inventory reduces in B/S..but with Non inventory I'm confused.. can we use both methods ( inventory &non inventory)? How it gets recorded and affect the B/S and P/L?

Please share your thoughts.

Thank you.

Also in QBO ...you can't post directly to HST ITC account..It give you default HST payable ( liability a/c) and HST suspense account...you can post in ITC account though Bill or expense only...at least that's what I know....😟

Hi Mileage2020:

Please take my advice with a grain of salt as I'm not an accountant, but here's how I would handle it.

Posting in the month prior to my opening, post any 'assets' (inventory) on to the balance sheet; in this way, you have a starting number of what your bought as part of the business and have a value for what the business is worth on its own.

In the following month, you can post reducing the inventory based solely on the goods used in that month, or you can expense everything, depending upon the bookkeeping method you're following for posting.  You would then of course have to undo this at the end of the month to back anything out of COGS back into inventory for unsold/unused inventory but if that's how you'll be doing it every month anyway, that makes the most sense.

Issue with it is that I am not tracking inventory in QBO so can't reduce opening inventory by touching it...only way I can record without tracking it in QBO is by creating non inventory items...which is fine with me...my problem is my opening inventory which will sit there if I don't use inventory tracking....I hope I'm not the only one with brand new business inventory who is facing this issue...any help would be greatly appreciated...

How do you plan to report accurate inventory and expense information if you're not tracking your inventory?

You have your opening balance which reflects all of the inventory your purchased with the business.

You then have your sales for the month, which reduces your inventory, and moves to COGS or expenses.  This can be established either by number of units sold, or by a physical inventory count - you should be doing a physical inventory count regularly even if you opt for the first option so you can catch shrinkage/theft.

The one you mentioned is called perpetual inventory count.( You know what is in system at point of time).. I'm doing periodic count( end of the year/Quarterly) it's not possible to track in QBO for our business .basically will be adjusted our inventory at the year end.

Not sure how people use non inventory items to create opening inventory in QBO...or what is the best way in my case.

Ooooh you mean like the pens and stuff? You’d still put them on the balance sheet as assets likely short term then the first month of opening you can convert them all to expenses if you wish.

Actually , we have our own POS system which tracks inventory so I don't have to track it again in QBO. I will be matching the report from POS and inventory valuation report from QBO along with physical count and than posting adjustment to QBO.

At this point start is the issue rest I can take care of..😇