How to record inventory when used internally

I'll guide you in handling that, Ibefunk.

You can combine inventory parts in QuickBooks Desktop to build and track the finished goods that you sell. Based on your example, you can set up the tires as inventory parts if you track their quantity. If you don’t track them, use non-inventory parts. For components that involve charges and fees when building, you'll have to set them up as other charge items. 

After that, add the bill of materials using an inventory assembly item. Once you're ready to combine or assemble the items, just follow the steps below:

1. Go to the Inventory menu, then select Build Assemblies.
2. If you don't see this menu, go to Vendors and select Inventory Activities>Build Assemblies.
3. Select the product you want to build from the Assembly Item drop-down menu.
4. Review the quantity on hand, quantity needed, and other information.
5. Enter the quantity needed to assemble the final product.
6. Add a memo as needed, then click Save and Close.

To learn more about how to set up items you assemble using components, you can read this article: Track the products you manufacture.

If you have any other inventory management questions, feel free to leave them below. I"ll get back to you as soon as I can.

That seems cumbersome. Is it not cleaner to do an invoice at $0.00 to a customer set to “used inventory” or another expense?

Hi there, @Ibefunk.

I want to ensure this gets resolved for you. But since every business is unique, I recommend consulting with your accountant. They can provide more expert advice in dealing with this situation. You may use our Find an Accountant tool if you don't have one.

To learn more about handling your inventory transactions in QuickBooks Desktop, see this helpful link: Manage your inventory, products, and services in QuickBooks.

If you have any other questions about inventory tracking or QuickBooks, let me know by adding a comment below. I'm more than happy to help. Have a good day.

@Ibefunk 

The issue is that the tires are not an expense until you sell them on the car.  Creating an invoice will book an expense before the car is sold.  If both the car and tires are inventory items, create a quick group item and add the vehicle and the tires to the group.  Then, when the car sells, sell the group item and both the tires and car will be expensed to COGS which is what you want.  

Thanks for taking the time reply. 

Once the tires leave the rack they are no longer new and now a used item on that car so in my mind they become an expense at that point, no?

I’m trying to keep this clean and simple as we do a lot of volume. Would it make sense to create a sales order under an customer  called “inventory upgrades” for zero dollars and track which car gets said item(s) by a class (which we already use per unit)?

@Ibefunk 

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Once the tires leave the rack they are no longer new and now a used item on that car so in my mind they become an expense at that point, no?  Techncially, no.  Since you still own the inventory (they're on the car now instead of on the rack), they are not an expense until sold to the customer.   

 

I’m trying to keep this clean and simple as we do a lot of volume. Would it make sense to create a sales order under an customer  called “inventory upgrades” for zero dollars and track which car gets said item(s) by a class (which we already use per unit)?  Bottom line is that you are almost guaranteed to sell the vehicle this year and, since you do a lot of volume, expensing a set of tires ahead of the vehicle sale is not going to have a material effect on your income.  You can sell them for $0 on an invoice, as you metioned.  I still like the idea of creating a group item (takes 1 minute) and putting both the car and the tires in the group.  Just my $.02.  You know your business much better than I.

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This example that you use for the tires would be the same for any service or parts that you would do to any vehicle that you have in your inventory. The way we handle this is to treat our own company as the customer and "sell" the tires to ourselves when performing service or adding parts to an in-stock vehicle. The expense is attributed to the vehicle thus "increasing" its costs/current valuation in our bookkeeping and reducing the margins upon its sale. I imagine this will not be a one-and-done event, and you should make sure to set-up your process so it will be easier in the future.