I buy and sell collectibles. When I buy a collectible, I mark it as inventory (inventory almost always represents a single item; I rarely work with quantity). The inventory remains as inventory unless I sell that inventory within the same year and I then mark it as cost of goods sold.
The problem I run into is when I reconcile my account each year. What do I do with old reconciled inventory that I purchased from a prior year and sold in the current year?
Previously, I have been re-categorizing reconciled inventory from a prior year to COGS, along with the year it sold in. For an example, a reconciled inventory item that I purchased in 2016, I will re-categorize as COGS-2021 since that item sold this past year. That way if my accountant needs to review prior reconciled years, she will know that was reconciled inventory that sold within a different year. However, my accountant says there is a correct way of notifying her that reconciled inventory sold without changing reconciled transactions.
I really would appreciate any help or advice. I was unable to locate any answers in Quickbooks' help links or the Quickbooks Community links.
Thanks for reaching out to the Community, achilles1000.
To properly identify what you should do with already-reconciled inventory, I'd recommend working with an accounting professional. If you're in need of one, there's an awesome tool on our website called Find an Accountant. All ProAdvisors listed there are QuickBooks-certified and able to provide helpful insights for driving your business's success.
Here's how it works:
Once you've found an accountant, they can be contacted through their Send a message form:
I've also included a couple detailed resources about reconciling which may come in handy moving forward:
Please don't hesitate to send a reply if there's any questions. Have a wonderful day!
It sounds like you're recording the purchase and sale of inventory properly. You mentioned reconciling your inventory - do you mean taking a physical inventory count? The only reconciling you need to do is to take a physical inventory at year-end. Once you have done that, that number will serve as both year-end and beginning inventory for the next year. Those numbers will never change.
In your example, if you purchased inventory in 2016 but did not sell it that year, that inventory would be included in 2016 ending inventory which also serves as the 2017 beginning inventory and, if it doesn't sell in 2017, it ends up in ending inventory of that year and so on and so forth until it sold in 2021, at which point, it is no longer in ending inventory and is allocated to COGS in 2021. Since you should have had that particular inventory item that was purchased in 2016 in the 2021 beginning inventory, there is no need to go back to any subsequent year and adjust. It should be carried forward through all of 2016 ending, 2017 beginning, 2017 ending, 2018 beginning, 2018 ending, 2019 beginning, 2019 ending, 2020 beginning, 2020 ending, 2021 beginning and then moved to COGS in 2021. Make sense?
The proper way to calculate your COGS for the year is:
Beginning of year inventory
+ Total purchases of inventory throughout the year
- End-of-year inventory
It should be noted that the only way to get the beginning and ending inventory amounts is to physically count your inventory. You may know your COGS based on your QB reports and end up backing into purchases or vice versa.
Thank you Rainflurry for taking the time to respond to my question. You have provided the most informative response as of yet.
I would like to learn how to use the year-end and beginning inventory feature? Is it only available in pro quickbooks (I currently have the general quickbooks account only)? Is there a quickbooks community link, help link, or video that shows how to use this feature (if not, can you provide a quick summary)?
Thank you for following up, achilles1000.
Let me add some information about inventory management in QuickBooks Desktop.
@Rainflurry was right, you only need to figure out the your physical inventory at year-end. This will give you the number that will serve as both year-end and beginning inventory for the following year since the feature you mentioned is currently unavailable in QuickBooks Desktop Pro.
Additionally, you can utilize reports such as Inventory Valuation Summary and Inventory Valuation Detail to help you check all information about your inventory value, stock status, and pending builds.
I've added this resource to learn more about tracking inventory assets and cost of good sold in QuickBooks Desktop: Understand inventory assets and cost of goods sold tracking
I've also added this link for more related articles that will help you manage your inventory.
Get back to me if you still have other inventory questions. I'll be here to help. Have a good day!