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Level 3

Pay a Purchase Order and update product cost (QBO)

We just set up our business and we purchased products from suppliers and sell to customers.

 

We created the products (inventory item), issued a Purchase Order to supplier, Copied the PO to Bill, and arranged Payment.

However, only the qty is updated in the product master, but not the product cost (purchase value). 

 

Please advise if any additional steps to be done to update the product cost.  Many thanks in advance 

 

Best regards,

Jacky C

 

Solved
Best answer October 25, 2020

Best Answers
QuickBooks Team

Pay a Purchase Order and update product cost (QBO)

Hi Jacky!

 

Knowing how QuickBooks tracks your inventory cost is very essential in the business setting. Allow me to step in and shed more light on this.

 

In QuickBooks, the cost of the product is based on its rate at the time of purchase, not on its cost in the inventory list. Therefore, you won't need to update it every time you make a purchase.

 

In addition, QuickBooks uses the First In, First Out (FIFO) concept when tracking inventory costs. Let's say you bought 1 pen at $20, and then you add 1 more at $30.

  • When you sell one pen, your realized cost (Cost of Goods Sold) will be $20.
  • When you sell the remaining pen, your realized cost (Cost of Goods Sold) will be $30.
  • When you sell both pens at the same time (meaning in one receipt), you will have two values for COGS: $20 and $30. See the transaction journal of my sample sales receipt below.

    You can view the transaction journal of a sales receipt or any transactions by clicking More at the bottom and choosing Transaction journal.

To conclude this:

  • Your cost is based on the rate when you buy the item.
  • You won't need to update the product cost on your item list every time you make a purchase.
  • You won't need to create another item just because of the cost changes.
  • QuickBooks will automatically report the realized cost based on the FIFO concept.

If you still need more clarification about the cost of an inventory item, please let me know. Have a good one!

 

View solution in original post

Moderator

Pay a Purchase Order and update product cost (QBO)

I appreciate you for reconfirming this with us, sychan.

 

Base on the procedure laid out, you're doing it right. Furthermore, when your supplier changes the product price, updating the price of your Purchase Order (PO) is optional since it's a non-posting transaction. You'll want to enter the new price directly on the bill or other expense transactions.

 

Here's an article for available reports that will help you see the product cost, the product on hand, and more: Use reports to see your sales and inventory status.

 

Also, you are correct when you say COGS automatically calculates once you issue an invoice or sales memo. Learn more about how QBO calculates COGS through this article: Cost of goods sold: How to calculate and record COGS.

 

To give more information about managing inventory in QuickBooks Online, check out this article: Inventory management.

 

I'll be right here if you have further questions. Keep safe and have a good one.

View solution in original post

10 Comments
QuickBooks Team

Pay a Purchase Order and update product cost (QBO)

Thanks for sharing details, @jacky C.

 

I’m here to guide you on how to update your product cost. You’ll want to edit the item from the Product and Services tab. Before doing so, ensure the quantity of the item is zero before adjusting the cost value. This way, it’ll not override the cost value of the previous item. 

 

Adjusting the cost value of the item while their still stock left affects the initial value of your inventory. This can cause discrepancies in your reports. In this case, I’d recommend creating another item at a different cost. I’d also recommend consulting with your accountant for additional advice on the best action to take.

 

Nonetheless, here’s how to edit your product and service item in your QuickBooks Online (QBO) account:

 

  1. Go to the Gear icon. 
  2. Select Products and services.
  3. Locate the product you want to adjust and click the Edit link under the ACTION column.
  4. Adjust the cost of the item then click Save and close.

You can also read this article for more information: Adjust inventory quantity on hand in QuickBooks Online.


Additionally, you’ll want to refer to this article on how you can manage and track your inventory effectively in QBO: Set up and track your inventory in QuickBooks Online.

 

Let me know if there’s anything else I can help you with about managing your inventory. I’d be more than happy to work with you. Keep safe.

Level 3

Pay a Purchase Order and update product cost (QBO)

@JasroV 

 

Hello Jasro, thanks for the prompt reply

May I summarize our previous actions in QBO

1. new start  business and no inventory in the beginning

2. created the product master with ZERO inventory, we did not enter a cost for the product

3.. created PO to purchase the product from the supplier with a specific price per item

4. copied the PO to bill

5. paid the bill

 

What the purchase cost is not UPDATED in the product.

What should be the CORRECT step to increase inventory qty with COST.

 

Thank you for your advice again.

Jacky

Level 3

Pay a Purchase Order and update product cost (QBO)

Hello @JasroV 

 

Thank you for your reply,  I would like to clarify how QuickBooks add QTY and COST to the product after receiving a Purchase Order.

I would like to summarise my actions again.

 

1. start up business, there is no initial inventory

2. created product master with ZERO inventory

3. created Purchase order to buy products from supplier at a specific price per item

4. copied PO to bill

5. Paid the Bill

 

Why the product inventory is not updated with QTY and COST?

 

Please advise.  Thank you so much

 

Best regards.

Jacky C

Moderator

Pay a Purchase Order and update product cost (QBO)

Good day, @sychan,

 

Joining the thread to share some more information on how inventory works in QuickBooks Online.

 

The cost you assign to vendor transactions will not update the cost under Products and Services instantly. The only time your item costs are updated is through editing them manually like what JasroV cited in his answer.

 

This is because QuickBooks Online uses the Sources and Targets concept. For example, when you create an expense for an inventory, the source of the information is the Products and Service page where you initially set up its costing.

 

Since the entry will use the data from its source, the process can't be any other way around. That's the reason why anything you manually entered on the transaction, regardless if its the price or cost, will not make any changes to its source.

 

The process you're doing with inventory receiving is fine. The only thing you need to do if there are changes to the costing, is to do it manually. This is to ensure proper reporting for your financial statements and books.

 

Learn more about inventory tracking using the links below:

 

Let me know if you have other questions about this. I'll be right here if you need anything else. Have a good one!

Level 3

Pay a Purchase Order and update product cost (QBO)

hello @Jen_D 

thanks Jen for the explanations.

in future, when we purchase the same item at a different price, if I do not agree the way @JasroV advising to create another product (while the product still have stock qty), is there any way to work around?

 

we are unable to apply to QBO inventory and cost concept in our business.

this is making our operations extremely difficult.  I am seriously consider to stop using QBO since we just started the business.   please advise if there's any solutions.  Thank you so much

 

jacky c.

QuickBooks Team

Pay a Purchase Order and update product cost (QBO)

Hi Jacky!

 

Knowing how QuickBooks tracks your inventory cost is very essential in the business setting. Allow me to step in and shed more light on this.

 

In QuickBooks, the cost of the product is based on its rate at the time of purchase, not on its cost in the inventory list. Therefore, you won't need to update it every time you make a purchase.

 

In addition, QuickBooks uses the First In, First Out (FIFO) concept when tracking inventory costs. Let's say you bought 1 pen at $20, and then you add 1 more at $30.

  • When you sell one pen, your realized cost (Cost of Goods Sold) will be $20.
  • When you sell the remaining pen, your realized cost (Cost of Goods Sold) will be $30.
  • When you sell both pens at the same time (meaning in one receipt), you will have two values for COGS: $20 and $30. See the transaction journal of my sample sales receipt below.

    You can view the transaction journal of a sales receipt or any transactions by clicking More at the bottom and choosing Transaction journal.

To conclude this:

  • Your cost is based on the rate when you buy the item.
  • You won't need to update the product cost on your item list every time you make a purchase.
  • You won't need to create another item just because of the cost changes.
  • QuickBooks will automatically report the realized cost based on the FIFO concept.

If you still need more clarification about the cost of an inventory item, please let me know. Have a good one!

 

View solution in original post

Level 3

Pay a Purchase Order and update product cost (QBO)

Dear @JessT 

 

Thank you for your message and such a relief for your explanations.

 

May I reconfirm with you that my previous procedures of stock-in is correct:

1. create product (SKU) in the master

2. create PO to supplier

3. copy PO to bill

4. paid the bill

 

If supplier changes the product price in future order, we just change the price in the PO.

Since QBO use FIFO approach, we can see the stock value details in stock value report, but in Product & Service Tab, the product cost will not be shown.

The calculation of COGS is automatic when we issue an invoice or sales memo.  We can view the transactions details in QBO standard or customised reports.  

 

Is the above assumption correct?

Kindly advise.  Thank you so much.

 

Regards,

Jacky C.

Moderator

Pay a Purchase Order and update product cost (QBO)

I appreciate you for reconfirming this with us, sychan.

 

Base on the procedure laid out, you're doing it right. Furthermore, when your supplier changes the product price, updating the price of your Purchase Order (PO) is optional since it's a non-posting transaction. You'll want to enter the new price directly on the bill or other expense transactions.

 

Here's an article for available reports that will help you see the product cost, the product on hand, and more: Use reports to see your sales and inventory status.

 

Also, you are correct when you say COGS automatically calculates once you issue an invoice or sales memo. Learn more about how QBO calculates COGS through this article: Cost of goods sold: How to calculate and record COGS.

 

To give more information about managing inventory in QuickBooks Online, check out this article: Inventory management.

 

I'll be right here if you have further questions. Keep safe and have a good one.

View solution in original post

Level 3

Pay a Purchase Order and update product cost (QBO)

Quite an interesting topic.

 

There's no need to update the item's price on the PO.. Just enter the new price on the bill (or expense) transaction.

 

PO is non posting entry.

Level 3

Pay a Purchase Order and update product cost (QBO)

thank you @Charies_M 

 

sure I will go to the article suggested for further insights about this topic.  Thanks so much.

 

regards,
SY Chan 

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