Categorizing Labor cost for a vendor

Thank you for posting here in the Community, @NS2020.

First off, you can create a bill for the raw materials under the vendor where you purchase the product. 

Then, create another bill for the labor cost. You can create a labor cost account with sub-accounts (products) or create items for the labor associate to the labor cost account. 

Here's how to create an Account for the labor cost:

1. Go to the Accounting tab and select Chart of Accounts.
2. Click the New button.
3. From the Account type field, choose Expenses.
4. In the Detail type, pick Cost of labor.
5. Then, name the account "Independent Contractor labor" or something that makes sense to you and easy to remember. 

Additionally, to keep you books accurate, I suggest consulting an accountant to guide you in choosing a specific expense account. 

Also, in QuickBooks Online (QBO) you can pull up a report that will show you the last categories used for a specific vendor.

Here's how:

1. Go to Reports.
2. Enter Expenses by Vendor Summary in the search field and click on it to open.
3. Set the date under the Report period.
4. Click on Run report.
5. Locate the vendor and select the amount to open the Transaction Report page.

Reach out to me if you have any follow-up questions. I'm here to help further. Take care always and have a good one.

Hi Divina, 

Thank you for your reply. I thought cost of labor should be part of cost of goods sold, since it is one of the "component"  that is used to assemble the product so it is part of the goods sold. 

Thanks for coming back, NS2020.

You have a point. Labor cost is part of cost of good sold. However, labor is considered as expense reason why we recommend creating a separate account for labor cost under expense account. Of course, it would still be best to consult your accountant to guide you in dealing with this type of situation.

I'm adding this reference for more information about managing inventory assets and cost of good sold in QuickBooks Desktop: Understand inventory assets and cost of goods sold tracking.

Be sure to get back to me if there's anything else you need clarification with. Have a good one.