Build Assemblies and Cost of Goods Sold

To follow up, I looked into whether it was happening for other Assembly Builds and it is, so now I'm just confused why sometimes a Build will only credit the Inventory Asset account, but other times it credits that and debits from COGS account. What compels the system to do this? In this screenshot it's for one Assembly Build, showing the most recent Builds. You can see some Builds are single lines, while others list 3 lines showing the various debits and credits I'm speaking of. Can someone explain please? Thank you!

Thanks for sharing a screenshot of your QuickBoks, ljtaylorsales.

The amount in the COGS account usually increases when an item is sold, and not when an assembly is build. The Inventory Asset account on the other hand is automatically created by QuickBooks and will increase once you purchase an inventory item. More details about these accounts are discussed here: Understand Inventory Assets And Cost Of Goods Sold Tracking.

A possible data issue might have also caused the the increase when an assembly is made. I'll share some steps with you that can resolve common data issues in QuckBooks Desktop. Here's how:

Run the Rebuild Utility

1. Go to the Utilities menu, then select Rebuild Data.
2. Select OK if you receive a prompt to back up your company file.
3. Click OK when you get the message Rebuild has completed and proceed with the next step.

Run the Verify Utility

1. Go back to the File menu, select Utilities, and then click Verify Data.
2. Select OK when you see the message QuickBooks detected no problem with your data. You may continue using your company file.
3. If Verify finds an issue with your data, you will be prompted to Rebuild Now or View Errors. Select Rebuild Now.

Once done, go back to your inventory report to check if the COGS account is no longer debited when creating an assembly. 

Just in case you're still getting the same issue, I would recommend reaching out to the Technical Support Team. They can take a closer look at this to determine why the CGOS account is affected when building an assembly. Follow the steps in this article on how to reach out to them: Contact QuickBooks Desktop Support.

Please don''t hesitate to reach out to us again if you need anything else. 

Hi, Ok I will read the article. Problem with rebuilding/ verifying data is this debiting COGS when I build an assembly happens everyday and we've had this system for years. If I rebuild data, won't I alter everything in my system? I cannot mess up my balance sheets because of tax reasons. So won't verifying data not work for me in this case?

Actually unfortunately I have called the Quickbooks desktop support multiple times and no one has been able to help and actually their answers are much worse and less helpful. The two people I have talked to have very little understanding of what I'm asking :( which is confusing because I thought they were the top people to ask. Both just ended up trying to sell me an entire new QB system (that doesn't fix the problem). 

When I build assembly, the inventory increases $6.73 + an additional separate line item of $788.64. Meanwhile -$6.73 from COGS account. 

When I invoice for the items built, the inventory decreases $795.60 and COGS account is -$795.60. 

Doesn't seem balanced. 

Thanks

The tool will simply fix know data issues in QuickBooks Desktop and won't mess up anything, ljtaylorsales.

To make sure that you can restore your data if you ever run problems, you can create a backup of your company file. After you've created a copy, you can proceed with the verify and rebuild tool.

In addition, here are the common issues that you can fix using the tool:

• Fatal errors when you use QuickBooks Desktop.
• Discrepancies on reports, such as invoices or bills that post with negative values.
• Deposited payments show up in the Payments to Deposit window.
• Balance sheet reports do not show all accounts.
• Names are missing from lists.
• Transactions are missing.
• Run a well-data checkup to make sure your company file is error-free.

Also, I suggest reaching out to your accountant to explain you further the difference between Inventory asset, and COGS account.

For reference, you may also want to use the Balance Sheet and Inventory Valuation reports to find transactions causing the discrepancies. 

Feel free to let us know about the process. I'm always here to get back to you if you may encounter any other concerns.

Hi, I've now noticed that when the item was built, it debited Inventory Asset at $788.64 which is $26.29 per item. Then when the item was invoiced, the COGS account was debited as $795.60 which would be each item as $26.52 each instead. Why are the average costs different between Building the Item at 30 units, and then invoicing the item at 30 units? Maybe this is why the Inventory account was debited an additional $6.73 and COGS credited the same when the item was Built, so that it would match more or less when the item was Invoiced at a higher average cost?

Thank you!

Hello @ljtaylorsales,

Let me add a few things on how your assembly items affect the costing of your inventory items.

@JenoP is correct, the amount posted in the COGS account of your inventory items increases as you make a sale after building an assembly. This is because of the average cost that is calculated base on the number of inventory items in an assembly.

On top of that, you can read this article to learn more about the average cost of your items in the last section of this article: Understanding inventory assets and cost of goods sold tracking.

Additionally, I've got you this helpful article for guidance in preparation for the 2020 tax season: QuickBooks Desktop Year-end Checklist.

If there's anything else that I can help you with, please let me know by leaving any comments below. I'll be here to lend a hand.

Hi,

Thank you for responding. Unfortunately the article is for regular Sale QB, but we are Manufacturing so we do not buy our Inventory, we build it. In this way the article does not explain how Inventory Asset account and COGS account are affected when Inventory is first built, then sold. We use both Inventory and Non-Inventory items in our Build Assemblies - so how is Average cost affected in this case? Please see screenshot for one of our Assembly Builds. You can see that when this Build occurs, the COGS account is credited and Inventory Asset debited equally, plus Asset account also debited the sum of ALL the costs of the Assembly Items below it, regardless of which account it is coming from which you can see next to the component... On the left side of the screen is the Item List for one of the Non-Inventory items just to show you how it is set up. So what is the deal with the COGS account being credited and how does QB determine that amount? Where does it get $4.56 from? The cost of both Non-inventory items used in this build is just $0.20. PLEASE HELP, I can find NO articles that truly explain Build Assemblies in this way. Please do not just link me to a surface level article. THANK YOU!

Hi there, @ljtaylorsales.

The Average cost only calculates the sum of the cost of the items in inventory divided by the number of items. If you have further questions about an average cost, the best way to do is to run the Inventory Valuation Summary report. This shows you how QuickBooks got the item's average cost.

1. Select Reports, then select Inventory.
2. Select Inventory Valuation Summary, then set the dates to All.
3. Double-click the item in question.

You can also refer to this helpful blog for more info about this report: Common QuickBooks inventory accounting mistakes.

Additionally, non-inventory items are tracked as a current cost (Cost of Goods Sold) and they are recorded on your Profit & Loss statement when they are purchased. You will only see the cost of your non-inventory items on your Profit & Loss statement after the items associated with them have been sold.

Here are a couple of articles that you may find helpful:

• Track the products you manufacture
• Understand inventory assets and cost of goods sold tracking

Feel free to comment down below if you have any other concerns or questions about managing inventory. I'm always glad to help in any way I can.

Hi @ljtaylorsales, 

I seem to be having a similar issue... When I create builds, it's impacting our COGS and I can't seem to figure out how or why it's doing that. On top of that the amounts seem come out of nowhere so I can't figure out a fix. 

Have you found any solutions or help yet? 

-Reid

Let me add a few details why when an assembly is built it's impacting your Cost of Goods Sold (COGS), reidpearson8.

The amount in the COGS accounts increases once an item is sold, not when an assembly is built. The Inventory Asset account on the other hand is automatically created by QuickBooks and will increase once you purchase an inventory item. You'll want to make sure to check if the item is allocated to the asset account and not COGS. To do this, follow the steps below:

1. Go to Lists.
2. Choose Item List.
3. Locate and double-click the Inventory Assembly.
4. At the bottom, select the Asset Account then click OK.

For more information, please check this article: Track the Products You Manufacture.

You'll want to understand how QuickBooks handles inventory assets, the average cost, and the Cost of Goods Sold (COGS). Please read this article so you'll be guided: Understand Inventory Assets and Cost of Goods Sold Tracking.

Fill me in if you need further assistance with the inventory. The Community is always here for you 24/7.

I've experienced the same issue, but only when I've already sold that item, had a negative inventory and then built it.  Specifically we have a winery.  We book the sale of the wine before it is bottled.  Once bottled, we build the item, which places the item in inventory, corrects the negative inventory balance and generates the cost of goods sold.  However, I then have to do a journal entry to reclass the COGS to the proper class.  My question is how do I associate that COGS with the item?  When I run the P&L, the COGS sold shows up in the proper COGS account and class, but when I run the Sales by Item summary report, the total COGS is off by the amount of COGS generated when the product is built.

I'm here to help associate the COGS account with the item, GrimmEricB.

Before building an assembly, you need to review the account used to track the inventory item. The Sales by Item Summary reports provides a recap of all item you've sold, over a period of time.

Please know that there are two additional fields when you create an item. Under the Purchase Information section, select the COGS account to track payments for the item. And, select an income account from the Sales Information area to  track the amount you earn from selling the item.

Then, choose an asset account in the Inventory Information. By default, QuickBooks automatically assign an account in this section. However, you can use a different one whenever you want.

Please refer to this link for additional information: Add, edit, and delete items. Then, click Create an item to learn how to associate accounts to an item.

Additionally, you need to select a COGS and Asset account when creating an inventory assembly to track bill of materials. You can refer to this article to learn how to products you manufacture: Set up your product’s bill of materials.

Upon sharing this, I still recommend consulting your account for specific instructions. Rest assured they can provide more details on which account to use when tracking your items.

I'm adding these articles to learn more about accounting side when you add an item in QuickBooks:

• Track the products you manufacture
• Understand inventory assets and cost of goods sold tracking.
  
  

Keep me posted if you have follow-up questions about this. I'll be right here to provide the information that you need.

None of the answers in this stream actually answer the question of why a Build Assembly using all inventory parts would have an impact on COGS. The only actual answer is that it may be corrupt data. 

this does not answer the question as to why a Build Assembly of Inventory Parts would impact COGS. 

not helpful. Does not answer the question.

Ruth is correct, not helpful.  Why is our COGS account being credited for some unknown value when we are posting assembly builds?  And only on certain items, and not consistently 100% of the time?  Strange.   And that unknown value is increasing our average cost?  We need answers.

Ruth is correct, we need an answer and correction to fix the problem.  Some unknown value is being added to FG and COGS is being credited for that Value during an assembly build.  Just on certain items, but not 100% of the time for that item.  Assembly builds should not post to COGS!  Why is this happening?

I was on the phone with Tech Support this week for two hours with the same problem.  After verifying and rebuilding numerous times, I was told it is not their problem.  They basically told me it is my problem with how I was building assemblies and to call my accountant.  When I explained it would stop and start crediting COGS they again said it is up to me to fix.

This isn't the kind of service I want you to experience, Jsmude36.

Let me make it up to you by making sure your building assemblies are correctly tracked in QuickBooks. And, I can share some insights why the Build Assembly of Inventory Parts function is impacting the COGS account.

Normally, inventory COGS is only affected when you sell inventory items on invoices or sales receipts. 

When you sell an inventory item, run the Transaction Journal Report for the invoice/sales receipt and you see the Sales/Accounts Receivable transaction and you'll see the Inventory/COGS transactions which credit the Inventory Asset account and debit the COGS accounts.

The amount on each side of the Inventory/COGS transaction is, Number of Items Sold x Average Cost of Item.

Also, please know that when you set up a bill of materials for building assembly, QuickBooks uses the COGS account to track the cost of items you sell.

If there is still confusion on how to track your assembly items, I recommend consulting an accountant. They can provide specific instructions so your books have accurate records.

I'm adding these articles for additional guidance:

• Understand inventory assets and cost of goods sold tracking
• Set up your product’s bill of materials.

Let me know if you need additional information about this by commenting below. I'll be right here to help manage your inventory items to build finished goods.

MaryLand T    the problem is not shipping or invoicing - that function is working properly -

DR  AR

DR COGS

CR  Sales

CR  FG

The problem comes up transacting assembly builds.  

It should reduce component inventory, post labor earned, and move this value to FG

On some build transactions, QB is adding extra value to FG, and that extra value is credited to COGS.  Why/How?  I am a manufacturing accountant 43 years experience.  building FG should have nothing to do with COGS.  this error is inflating our FG value and undervaluing COGS    

Please don't explain again how invoicing works.  that function is working correctly.  The build assembly is not working correctly - and this is not consistent.  We build around 1000 different items. and this has happened to about 7 items.  And not every time those 7 items are built does this happen.  Why is it posting a credit to COGS for an inventory build?  that is the question.

thanks

Rex

Thanks for coming back, @REA4.

I have some information about COGS credit. When adding a COGS journal entry, you will debit your COGS Expense account and credit your Purchases and Inventory accounts. Purchases are decreased by credits and inventory is increased by credits.

That said, you'll want to verify your entry that might cause the credit. 

However, if this isn't the case on your assembly built, please contact our Customer Care Support so we can investigate further. Here's how to reach out:

1. Go to Help, then choose QuickBooks Desktop Help.
2. Select Contact Us.
3. Enter a brief description of the issue, then tap Continue.
4. Click either Chat or Get a callback.

I'm also adding this link in case you need help with other inventory-related tasks. It has articles that'll guide you along: Expenses and vendors.

If you have follow-up questions or concerns with your inventory account, please don't hesitate to reply. I'm more than happy to help. Have a good one.

The extra CoGS journal entries that occur sometimes when you do a build assembly are frustrating because it's not very clear on why QB would do that. You know that your GL accounts ( Asset, CoGS, Sales ) are correct for the Item, but why is QB adding an extra journal entry on the Build Assembly for CoGS. I wonder if the extra CoGS entry is a difference between the Cost of the BOM item and it's average cost? The extra CoGS entry on the Build Assembly seems like the result of QB reconciling some kind of fractional averaging issue by adding the extra CoGS journal entry. QB is deciding that not enough dollars have been accounted for in the current set of Build Assembly costs, thus QB adds the CoGS journal entry. 
The Transaction Journal report should simply be the result of the number of raw materials used times the average cost, but some times it seems like QB is adding that extra journal entry for CoGS. There should be NO CoGS entries in the Build Assembly function, but QB is reconciling automatically a fractional difference in averaging. I would like to see the algorhythm in QB for Build Assembly. 

I have a similar issue, and I read through all the comments (at least up to today) and none of those comments seem to solve the issue, however I gleamed pieces of helpful information and I believe I have solved the issue, let's find out. (Side note, I am using QB Desktop Enterprise (Silver-I think), Manufacturing and Wholesale. I have lots of Items that I use to build lots of Assembly items.)

I've received all the inventory required to Build my Item Assembly. All of the inventory was recorded to the appropriate Asset accounts for what I paid for them. In doing this, all of the Average Costs of the Items I received have also updated. Therefore, I have a difference between the cost of what I received, and the Average Cost of the Item. (For example, I received one of the items at $35.00 each, and the new average cost is now $35.27.) I also have a Service of $5.00 on my BOM for my Assembly Item.

I now Build my Assembly using the appropriate function in QB. It assigns a Number to the Assembly, 13099 and I pull a Transaction Detail by Account, filtered to Transaction Type "Build Assembly", and filtered to "Number" 13099. I can now see the JE booked for this build assembly. The asset accounts for the individual items are Credited for the Average Cost of $75.95, my Item that was built is debited for $80.95 into the appropriate asset account. That leaves a difference of $5.00, my Service Item. This is booked as a Credit to the COGS account set up with the Service Item. This JE is now in balance, but wait, the issue that we all complain about, I have another Debit in the COGS account of the New Item and a Credit in the COGS account of the New Item for $1.22. This is the difference between the Cost that I recorded the Inventory at when I purchased it (for example the $35.00 for the item I mentioned above), and the Average Cost (which is $35.27 for that same item) that QB calculated when I recorded the purchase. (Remember, my example amount of what I received in inventory was just for 1 of the many inventory items in my Assembly Item. So, my example of $35.00 is for just that item, and $1.22 is the total of the difference for all my items in the Assembly Item.)

So there it is, the annoying COGS entry that seems to inflate COGS values is moving actual cost from the asset account to average cost on the P&L. (Notice it does this for the Service account, even if it is not sold yet.)

The best way I've come up to "minimize" this crazy JE is to create a new Item each time I receive the same product from the same vendor but with a different price. I do this by defining an Item Number as "type-model-coating-vendor(2-digit abbreviation)-dollar(rounded up to whole dollar)". Then I use the "Where Used" function in the "Activities" section of the Item to update all of the Item Assemblies for my builds. I hope this helps.

I would imagine that inventory will increase, because you are adding labor cost to the raw materials to create the assembly. I cannot really see the make-up of the assembly, but I would look at that first.