quickbooks categorization

Ummm....  Your friends "Company" is a "Customer" isn't it? 

So I'm not sure why you're trying to do anything differently.  All the T-Shirts come in on one Bill and gets entered.  You then create an Invoice for half (or however many) as a COGS to your friends Company and ship them off.

If you're trying not to show your friends Payment as Income, then you're getting into a bigger issue that you really need to run by your CPA/Tax Accountant.  You really don't want that money *looking*like* Income you were trying to hide.  My guess is that they'd have you put the friends part of the order in a Liability Acct, but not sure that will really work.  So give them a call and see what they recommend.

I should have been more clear- Our "friend" is another company we work with. We were getting ready for a tradeshow and wanted to have T-shirts made with our logo to sell. The other company asked if we could order some for them as well. They then Zelled us the money. I am NOT trying to hide anything. I am simply trying to record it correctly so I don't have any issues with the IRS or my COGS numbers.

So when I categorize, do you think splitting the transaction is correct?  My portion would be categorized as cogs and what would his be categorized as?  I can't record the whole amount as cogs since part of that money is the other companies.  I like the invoice idea. Thank you for that! 

The problem as I see it is that you bought a product from a Vendor and you're now being Paid by a "Customer" whether they are a friend or not.  I'm NOT an Accountant (which is why I'm saying to ask a real one), but my business sense is that it's Income or it's money under the table.  Either of which are not what you want to be found if not reported.

So your CPA/Tax Accountant is going to be the one to tell you how to do this.  Suppose the other Company could have given you a "Loan" and you can create a Liability Acct.  Then pay for that Liability with the T-Shirts.  But any audit I would see though that.  But I'll further say that there must be a way to legally do it.  It's common business practice to get the best deal you can.  I probably would have ordered the T-Shirts and then each of us send in a check for our portion.  But again, I'm back to the CPA/Tax Acct, which is why they have to go to school all the time for this stuff.

I will definitely be talking to my bookkeeper before doing taxes for sure! Thank you for the help!