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Level 1

How to classify credit card inventory purchases?

Hello! Quickbooks newbie here, met with a CPA today and am still lost.

 

Background info-

I have recently been doing business as a sole proprietor using excel as a record keeping tool. I have no become an LLC and have begun to do business with a fresh QB plus account book.

 

Here is what I am trying to do.

 

I have a credit card and have made six purchases on inventory that I will be selling on QB. This inventory is new and not something I have sold in the past and is not currently entered into my inventory under product and sales.

 

This credit card is linked to my QB PLUS account so the six transactions are populating as needing review. 

 

How do I do these two things;

Classify these credit card charge?

Account for the new inventory?

 

Thanks in advance!!

 

 

(Title has been edited by moderator for clarity)

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Solved
Best answer 08-17-2017

Accepted Solutions
Level 12

Re: Credit card inventory purchases

Like everyone new to QB and edspecially bank linking I am going to suggest the same as I always do.

 

Enter your transactions as if there were no bank feeds. Enter the card charges against teh credit card type account you will have set up. After turning on Inventory in the charges you can specify amounts and it will add to your inventory. Both of your issues will be accomplished in one set of transactions. Charging to a credit card is a current expense or inventory purchase while paying down the card balance is only cash flow, neither income nor expense.

 

Use the feeds as a confirmation, do not depend on them for your transactions. You will be presented with a greem match when yoru entered transaction in dollar and date corresponds to something in the feed - it is still up to you to determine if it is correct, but entering data first is better than editing a feed item and then saving .

 

 

View solution in original post

6 Comments
Level 12

Re: Credit card inventory purchases

Like everyone new to QB and edspecially bank linking I am going to suggest the same as I always do.

 

Enter your transactions as if there were no bank feeds. Enter the card charges against teh credit card type account you will have set up. After turning on Inventory in the charges you can specify amounts and it will add to your inventory. Both of your issues will be accomplished in one set of transactions. Charging to a credit card is a current expense or inventory purchase while paying down the card balance is only cash flow, neither income nor expense.

 

Use the feeds as a confirmation, do not depend on them for your transactions. You will be presented with a greem match when yoru entered transaction in dollar and date corresponds to something in the feed - it is still up to you to determine if it is correct, but entering data first is better than editing a feed item and then saving .

 

 

View solution in original post

Level 1

Re: Credit card inventory purchases

Yes but I believe her question was... or at least mine is... 

 

when classifying that inventory purchase, where in the chart of accounts does it get assigned?  Cost of Goods sold?  Inventory asset? 

Level 15

Re: Credit card inventory purchases


@marylanai wrote:

Yes but I believe her question was... or at least mine is... 

 

when classifying that inventory purchase, where in the chart of accounts does it get assigned?  Cost of Goods sold?  Inventory asset? 


Depends, if you have a subscription to QBO Plus, then you have inventory type items and should use them.

 

In company settings,  turn on qty tracking (inventory)
and
in company settings you also turn on the items table and purchase orders.

Then when you enter an expense or bill, about half way down the left side is a title "item Details" click that and a table opens where you can select the item, qty and item total cost for purchasing inventory

 

You can not, not purchase inventory type items from a bank feed.

 

The workflow is, and has always been, make entries, download banking, match.

 

While advertised as a wonderful thing, the transactions dates for entries are wrong if you use banking to make them.  A transaction occurs when you make it, not when it finally clears the bank.

 

LLC is not a tax type for filing taxes, you are taxed as a sole proprietor, partnership or corporation, and your accounting is governed by that type of business.

 

Level 1

Re: Credit card inventory purchases

Thank you @Rustler.  I did some further research here on the forums into the topic, as i realize that fundamentally I'm struggling to grasp the differences between accounting inventory purchases as either an asset or COGS.  I found several other threads where your replies were very helpful.

 

(like this one

 

 

 

I am just starting my retail business, and chose not to purchase QB with inventory tracking because the POS system I use (lightspeed) has very strong inventory mgmt capabilities.  I was beginning to think I will be forced to upgrade my QB, but it sounds like as long as my POS enters sales accurately, I can get by.

 

This post  was quite helpful --(which by the way I am mostly recording for my own reference later! -- or in the case that someone else with a retail shop is wondering the same thing)

 

thanks again. 

 

Level 12

Re: Credit card inventory purchases

This is an old post, but it popped up because of some background changes.  To answer @marylanai inventory purchased is eventuay BOTH an asset and COGS.

 

When an inventory item is purchased it becomes an Other Current Asset, you have zero expense until you sell it. When you sell, and record income, is when it is posted to COGS (Cost of Goods Sold), until you sell you have no cost

Level 1

Re: Credit card inventory purchases

I have been reading this thread and I think it answers a problem we are having.  Can someone please clarify.  We buy products and sell them, so in reality we should be coding the purchase to other assets so it doesn't hit COG when we receive the items into inventory.  Then when sold it will hit the cog.  Am I understanding this correctly .  Right now we are double dipping on expenses each month.  We make purchases and have that coded to a COG account-- then with advance inventory turned on, it is hitting the COG at time of sale.   Am I understanding this correct we should change the purchase to other asset inventory

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