Change product and service item types in QuickBooks Online

When you add products and services as items in QuickBooks, you give them a type. There are four item types: inventory, non-inventory, services, and bundles. These help you categorize the products and services for better tracking.

Note: You can't change bundle items. QuickBooks automatically assigns them a category.

The value of your inventory is based on the quantity you have in stock. QuickBooks tracks this value in your Inventory Asset account, which is part of your Balance Sheet. You change inventory items types the same way because it would delete assets that are part of your business's overall value.

If you need to change an inventory item to another type, you have a few options. You can simply sell what you have in stock. When the quantity is zero, make the inventory item inactive. Then you can create a new non-inventory or service item to replace it.

Or, if you made a mistake and need to remove an inventory item, you can make an inventory adjustment. This records what you changed and keeps everything balanced. You shouldn't adjust your inventory for any other reason without help from your accountant. If you're unsure, reach out to your accountant. This can get tricky and they know how to handle the next steps. Don't have an accountant? We can help you find one.

If you decide you need to remove an inventory item, there are several steps. First, adjust the inventory item's quantity:

1. Select Settings and then Products & services (Take me there).
2. Find the inventory item. Then select Edit from the Action column.
3. In the Quantity on hand section next to Adjust, select Quantity.
4. In the Inventory Quantity Adjustment window, enter 0 in the New Qty column.
5. Select Save and close.

Now you have no inventory for that item in QuickBooks. Next, get the total value of what you adjusted:

1. Select Settings and then Chart of accounts (Take me there).
2. Find the Inventory Shrinkage account and select Run report.
3. Look for the inventory item you adjusted. Take note of the amount of the adjustment.

Finally, create a journal entry to account for the adjusted inventory:

1. Select + New.
2. Select Journal entry.
3. On the first line, select Opening Balance Equity from the Account ▼ dropdown.
4. In the Debit column, enter the amount of the adjustment.
5. On the second line, select the Inventory Shrinkage from the Account ▼ dropdown.
6. In the Credits column, enter the same amount of the adjustment.
7. Select Save.

Now you've accounted for the inventory adjustment and balanced your books. Follow the steps to make the inventory item you want to remove inactive.