Quickbooks Desktop Non-Inventory items and vendor bill entry accounts

Thanks for reaching out to the Community, JillK1.

I would love to help you, but I need some information about your concern. Could you please provide more details regarding the non-inventory items and vendor bill entry accounts?

Any additional info or a screenshot of the interface will be greatly appreciated. We are looking forward to your reply. Have a good one!

Since it is QB Enterprise 2008 desktop version, I don't have access unless I am at the client's.  If my description above is not clear, I will try to ask differently.  When entering vendor bills, do you enter non-inventory items in the ITEMS tab or the EXPENSE tab of the Enter Bill window? If the item is entered under the EXPENSE tab, my client would use a COGS account and the name of the item in the description.  If entered under the ITEM tab, I believe the account is Inventory Asset (not positive of this). What is the correct way to enter vendor bills when purchasing non-inventory items?

Hello there, @JillK1. I'll share some information on how you can enter the non-inventory items when creating bills.

In QuickBooks Desktop (QBDT), the Items tab in the Enter Bills window is for recording anything that you buy, sell, or resell in the course of business like products. While, the Expenses tab is for recording the expenses incurred by the business such as phone service, rent, and utilities. 

That said, you have to enter the items (such as non-inventory items) you created in the Items tab and accounts for services your business incurred in the Expenses tab. 

For reference, check out this article: Enter bills in QuickBooks Desktop. 

Additionally, since non-inventory items are not tracked as inventory, you can use other accounts such as COGS when setting up this item type. You can reach out to your accountant for guidance on what account you should use to make sure everything is set up correctly. If you need to edit it, refer to these steps:

1. Select the Lists menu and choose Item List.
2. From there, look for the non-inventory item and double-click it to open.
3. Then, in the Account field, select the account appropriate for that item.
4. When done, select OK.

Then, to keep you in the loop when managing vendor bills, please read this link: Accounts Payable workflows in QuickBooks Desktop.

Once everything is fine, your next step is to pay your vendor bills. 

If you have any other concerns managing your vendor bills, please don't hesitate to leave a reply below. Have a good one and stay safe. 

Inventory item profiles have both an expense and income account.  Should the non-inventory item which is sold to a customer have an income or expense account in the item profile? I ask this because when a non-inventory item is changed to an inventory item, that single account on the non-inventory item profile populates the income account - makes me think that if you are selling the non-inventory item that account should be an income account. Is that correct?

I'll share information that could help you get through this.

Inventory items are used to track products that you buy, sell, and hold as inventory. These items are associated with an inventory asset account, an income account (sales), and a cost of goods sold (COGS) account. When you sell an inventory item, it increases both your income (sales) and your COGS accounts. The difference between these two accounts represents your gross profit.

Non-inventory items are typically used for items you purchase or sell but don't track as inventory. They can represent goods and services you resell but don't carry in stock. When you sell a non-inventory item, the sale is recorded as an income, and you generally don't have a separate COGS account associated with non-inventory items. Instead, you typically record the expense directly when you purchase the item from your vendor.

In your case, the specific setup and accounts you can use will depend on your business's needs and your accountant's recommendations. With that, I highly suggest you consult with your accountant or financial advisor to ensure that your chart of accounts and item profiles align with your financial reporting requirements.

I'll leave these articles for future purposes:

• Customize reports in QuickBooks Desktop
• Understand reports

Please don't hesitate to let me know if you have any QuickBooks-related questions or concerns. Take care!

@JillK1 

A non-inventory item is generally assigned to an expense account, not an income account.  If it is assigned to an income account, it will book the cost of the item as a reduction in income when entered on a bill, not as an expense as should be the case.  Inventory items have an income and expense account because inventory is not expensed until it is sold to the customer whereas a non-inventory item is expensed at the time of purchase.  When your client enters the vendor bill, it doesn't matter whether she uses the item tab or the expenses tab as long as the same expense account that is assigned to the item is entered if recorded on the expenses tab.  

If your client is an accrual basis taxpayer then, technically, they should record these purchases to an inventory account by using an inventory item or inventory asset account under the expenses tab if they don't use QB for inventory tracking .  The reason for this is because items (furnace, A/C condenser, etc.) that are recorded as non-inventory items will be expensed at the time of purchase whereas they should be expensed when the job is complete.  Also, if your client wants to itemize parts on their customer invoices, then they should use inventory items.