All about inventory, new to Accounting and QBO

Alekkson · ‎September 15, 2020

Hello,

I will try to explain what I don't understand about categorizing Purchases and managing stock assets in QBO.

First of all, I am an eBay seller.
I chose to use QBO inventory and sync it via OneSaas with eBay. I've added all my stock in QBO as a Stock Asset using "Sales of Product Income" as an income account and "Cost of Sales" as an Expense account.

When I purchase inventory to be sold I mark it as "Purchases"

When I pay for anything related to the sold item (as packaging and posting) it goes to "Printing, postage and stationery"

As is, when I go to "Chart of Accounts" it does not take all stock assets out from the cash in hand account.

What am I doing wrong? Shouldn't it take it out automatically?

I believe this is the reason I can't match my Cash in Hand account to my actual bank account.

Also, there is something that is confusing me really badly.

Other than reselling I also buy and refurbish Laptops. However, I sell them for parts after.

So, what happens is, I have one purchase for the laptop that is marked in "Purchases account" but it won't be listed in Stock Assets until it's refurbished and listed to sell. This means it is not counted as current stock until listed to sell. And once listed it's going to be listed as many items that will add up to the whole cost of the purchase.

Is that the correct approach? Am I doing this right or there is more to it?

The accounts I am using for categorizing are the defaults from QBO

Thanks for looking into my post!

GeorgiaC · ‎September 15, 2020

Thanks for getting back to me Alekkson,

Just to clarify, are you currently recording purchasing stock by using a 'purchase' expense account on a Bill/Expense/Cheque, and then adjusting the quantity of stock of each item manually within your product/service list?

The recommended way to record purchasing stock items would be to use a Bill/Expense/Cheque, using the 'item details' line to select the stock item and enter the quantity purchased, which will then automatically adjust your quantity on hand and stock asset account. The Cost of Sales account will only be increased when you record the sale of that item using an invoice/receipt transaction with the stock item selected.

You can see our guide here to the stock tracking system 'FIFO' which QuickBooks uses to track stock and record your cost of sales.

Thanks :)

View solution in original post

GeorgiaC · ‎September 15, 2020

Hello and Welcome, Alekkson :waving_hand:

Thanks for your detailed post.

When you record purchasing the stock items which you have created in your inventory you should do so by selecting the stock item itself on the 'Item details' line on a Bill/Expense/Cheque, rather than a 'Purchases' expense account.

Once you select the stock item on the 'Item details' line, this will autofill with the cost price which was entered in the settings and any default tax codes, and you can adjust the quantity if needed. This way QuickBooks will correctly debit the Item's Stock Asset account and credit your A/P, bank or credit card account. You may find our guide here useful for this.

If you're recording purchasing other items relating to the sale such as the packaging and posting, that is not sold as stock, then you're correct to record this to a separate expense account such as the default 'Printing, postage and stationery' account.

If you're unsure which accounts to use for the purchasing and re-selling of refurbished items, we'd advise speaking to your bookkeeper/accountant to make sure you're set up with the correct accounts for these. :)

Please get back to us below if you have any questions!

Alekkson · ‎September 15, 2020

Thank you for the fast reply.

I am unsure if I understand correctly.

I am currently not using the reorder function. When I stock items I have a transaction that I categorize as a "Purchase" and this transaction contains many items that I stock manually by adjusting the quantity on hand.

From your reply, I understand that I have to use the reorder function?

If so, should I change all current transactions that I have for stocking items to be Expenses? (Purchases is part of Cost of Sales)

GeorgiaC · ‎September 15, 2020

Thanks for getting back to me Alekkson,

Just to clarify, are you currently recording purchasing stock by using a 'purchase' expense account on a Bill/Expense/Cheque, and then adjusting the quantity of stock of each item manually within your product/service list?

The recommended way to record purchasing stock items would be to use a Bill/Expense/Cheque, using the 'item details' line to select the stock item and enter the quantity purchased, which will then automatically adjust your quantity on hand and stock asset account. The Cost of Sales account will only be increased when you record the sale of that item using an invoice/receipt transaction with the stock item selected.

You can see our guide here to the stock tracking system 'FIFO' which QuickBooks uses to track stock and record your cost of sales.

Thanks :)

Fiat Lux - ASIA · ‎September 16, 2020

@Alekkson

I would recommend using an inventory management app as the connector between QBO and eBay. Onesaas offers limited features.

Alekkson · ‎September 16, 2020

Thank you for the reply!

Any recommendations that could do the job with ease?

Fiat Lux - ASIA · ‎September 17, 2020

@Alekkson

You may explore these apps

https://go.tradegecko.com/register?code=fiat-lux

https://www.zaperp.com/ref/25/

Good luck!

Topics

Training

Community

Resources

All about inventory, new to Accounting and QBO