I have signed up for a craft fair at the end of the year and started mindfully reporting expenses. I can somehow understand that my actual inventory/assets are the projects that I create and sell and the raw materials like paints, brushes, canvas, etc. are my supplies. I already have invested in most of these materials as a hobbyist and am currently using them to produce my inventory. My question is, do I report my purchases as COGS even if I have not made any sales yet? Or do I list them as Inventory instead? Do I include all existing supplies and equipment as assets based on how much I purchased them before I registered as a business or estimate each price?
Crafts, or any business where the item you sell is unique, is technically inventory, but QB just does not handle unique items well.
Canvas if you buy in bulk, I would record as inventory, but if you buy one or two to work on then no just expense them to shop supplies. Things like brushes, paint, thinner, etc just expense them to shop supplies expense when purchased.
Use a service item to sell the craft item, and if you stocked canvas as inventory, you can put that item on the sales receipt with the qty and price. A finished canvas held as inventory, when you sell it you can click in the description on the sales receipt and type in the description, ie "Back woods canoe landscape"
Hey there, @juannyl.
@Rustler is correct with recording your bulk items as inventory items. Let me add more details and help you further.
You can also record an expense for the items you store for future use. Then, you can create a Bundle item for the finished product. This way, you can combine the cost of the canvass and the painting service as one line item when invoicing to customers.
Also, you have the option to include the details of the bundle in your customer-facing invoice or not.
Here’s how you can create the bundle item:
Don’t hesitate to get back to me if you have any other questions or concerns. I’ll be here to help.
Thanks for your response, @juannyl.
The Bundle feature is only available in the Essentials and Plus versions. This option can help track the supplies and will break down the cost of materials in the Cost of Goods Sold.
Normally, the COGS is affected only when you sell inventory items on invoices or sales receipts. To track the goods, enter them on the Products and Services page.
Make sure to click on the New button and not the arrow-down icon. This way, you’ll automatically see the Products/Service information screen.
For the office supplies, create an expense and use the Supplies Expenses category to track them. Based on the information provided, it looks like you’re using the Simple Start version.
You can consider upgrading to the Plus version to use the Bundle feature. Let’s go to the Accounts and Settings page to accomplish this task.
Since you'll be tracking items in QuickBooks, I'm adding article with detailed instructions and a video tutorial to enter inventory information: Inventory.
Reach out to me anytime if you have further questions or any other concerns. I'll be right here to answer you. Wishing you the best.