Question

Cash Basis Reports Inventory Handling

Forum|Forum|6 years ago
May 18, 2020
18 replies
46 views

I would like to use inventory items on our farm for input purchases so that I can better manage things from an accrual point of view. However, we file taxes on cash basis and intend to stay that way. I want to run accrual reports for internal use and cash reports for tax use.

My problem is that when I use inventory items and run a cash basis report, the inventory still shows up as 'other asset' on the B/S and does not show up as 'COGS' on the P&L. I would expect that if you run a cash basis report, that QuickBooks should simply skip the inventory account and post straight to COGS. From what I have read, I believe that QBO can be setup this way. Is there a reason that this doesn't work in QBDT? Am I the only one that shares this frustration?

I'm running 2016 Pro today, but I'd upgrade in a heartbeat if they have this issue resolved.

QuickBooks Desktop

M

Maybelle_S

QuickBooks Team

Hello there, @farmer_z.

I'm here with some insight to provide about why the Cost of Good Sold (COGS) is not showing up in the Profit and Loss report.

When running a cash basis report for Profit and Loss, COGS will only show once payment is applied to the invoice. COGS will not show until you sell an inventory item. The purchase on inventory will affect the Inventory Asset account.

Also, please know that the cash basis reports will use the invoice/bill date. If this doesn't show on a cash basis, it will show when you run accrual basis reports.

The system will use your preferred accounting method for all Summary reports only. Let's check the settings to see if you've selected the correct method:

Go to the Edit menu.
Select Preferences.
Click Reports & Graphs.
In the SUMMARY REPORT BASIS, select Cash.
Click OK.

Once done, you can now run your reports. Here's how:

Go to the Reports menu.
Click Company & Financial.
Choose Profit & Loss by Class.
Click Cash as your Report Basis.
Select Refresh.

To learn more about these methods, please check out this reference: Cash vs. accrual accounting: What’s best for your small business?

You can also visit this article to learn more about inventory and cost of goods sold: Understand inventory assets and cost of goods sold tracking.

Fill me in if there's anything else you'd like to know more about running the reports in QuickBooks Desktop. I'd be glad to help you out.

F

farmer_zAuthor

According to cash accounting principles, there is no inventory as all expenses should be recorded in the period in which they are paid. So I don't understand why QuickBooks would not expense the purchases when paid. Holding the value in inventory to expense as COGS when sold, as QuickBooks does, is not consistent with cash accounting principles.

Did I read correctly that QBO provides an option to immediately expense inventory items?

C

Catherine_B

Level 9

Hello there, farmer_z.

The accounts used in your items will depend on what type of account you entered when setting the items up. When setting up an item, you have the option to select an expense account in the Purchase Information section in which every time you purchase these items it'll post into that expense account. You can also reach out to an accountant if you need more help with identifying the correct accounts.

QuickBooks uses default accounts to post purchases to know more on how take account to these item, you can look into this reference that was also attached by my colleague: Understand inventory assets and cost of goods sold tracking.

The Community Team is always here 24/7 to help. Just leave a reply below and we'll hep you through it. Take care always!

I

itspaulo

Hello! Was your issue resolved by any chance?

I am having somewhat similar issues to you and have spent several hours on the phone with QB with no luck....

https://quickbooks.intuit.com/learn-support/en-us/reports-and-accounting/help-cash-basis-reports-not-expensing-inventory-purchases/01/802664#M112924

JessT

Moderator

Hi Paulo,

Thank you for joining the thread. QuickBooks is just applying the principles of the Cash and Accrual accounting methods on your reports.

On a cash basis, the COGS is realized when the invoice is paid, and your inventory asset account is also reduced.

On an Accrual basis, the COGS is realized whether the invoice is paid or not, and your inventory asset account is also reduced.

I would suggest checking the transaction details of the accounts in concern to understand the amounts better. You can do this by clicking the amounts.

If you have other concerns, feel free to reach back out.

I

itspaulo

Hi Jess - thanks for the response. I’m not sure if you had a chance to look through the post I linked but what you are saying should be happening isn’t happening.

Here’s what you said:

On a cash basis, the COGS is realized when the invoice is paid, and your inventory asset account is also reduced.

On an Accrual basis, the COGS is realized whether the invoice is paid or not, and your inventory asset account is also reduced.

But when I go on cash basis reports, the inventory asset is not reduced and COGS is not realized even though it has been paid. That is exactly my issue.

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