How do I enter COGS for items purchased before my business started?

@Heather5586 

Go to: Sales > Products and Services > New > Inventory

Enter:

1) The name of the product

2) Enter the initial quantity on hand (1) and enter a date prior to the date you sold the item.

3) Assign it to your inventory asset account.

4) Assign the appropriate income account. 

5) Enter cost.  This is what you paid for the item (~$50).

6) Confirm the expense account is listed as cost of goods sold.

Click save and close.

This will put the item into inventory at $50 cost and create a corresponding $50 entry to opening balance equity since this is your investment in the business.  Now, when you ring up the sale, $50 will be taken out of inventory and $50 will be booked to cost of goods sold, leaving a gross profit of $138.

Thank you so much for the detailed response. After searching for "inventory" I learned my version of QBs (the cheapest one) does not offer Inventory. I'd have to upgrade and pay $80 a month. Is there any other way to do this?

Welcome back, @Heather5586.

I've come to share some information about tracking inventory in QuickBooks Online (QBO).

The inventory tracking feature is only available in the Plus and Advanced versions of QBO. In your case, you'll need to have this option to register the items you're reselling as an inventory. This way, QuickBooks will report your sale and expense transactions appropriately.

If you're ready to upgrade your subscription, you can follow the detailed steps below:

1. Sign in to your QBO account as an admin user.
2. Click the Gear icon, then select Account and Settings.
3. Go to the Billing & Subscription menu.
4. In the QuickBooks Online section, select Upgrade your plan.
5. Choose a plan that is suitable for your business.
6. Follow the on-screen instructions to upgrade.

After upgrading, you can now set up and track inventory in QBO. You may also know how inventory tracking impacts your balance sheet and profit and loss reports.

Come back to this post if you need further details about inventory tracking. I'm still open to your replies, @Heather5586.

@Heather5586 

Yes, there are other options.  From an accounting and IRS perspective, if you don't track inventory, you don't expense the cost of items sold to cost of goods sold - you expense the cost of the items sold directly to an expense account when you purchase them or contribute them to your business.

To do this, create an expense account called "Supplies expense" or something similar.  This will be the account that you expense your items to.  Then, when you either sell the item from your personal collection or you contribute them to the business, create a journal entry: debit the newly-created supplies expense account and credit your owner's capital equity account.  That books your expense and your contribution to the item sold.  Finally, you just need to create a sales receipt/invoice for your customer for the sale price.