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Cost of Goods Sold with an incomplete BOM at time of down payment invoice.


I am trying to understand how COGS is reflected in the P&L and I have a specific issue with receiving down payments for assemblies that are not complete let alone built.


For Example:

I invoice 30% or $300 for a $1000 assembly that I will design, procure, and assemble.

I get the note that I do not have enough of these in stock to sell.

When I receive the  $300 payment, I see that my P&L reflects that on the income side.

Because I have no BOM or costs at time of down payment, there is no Expense or COGS reflected in the P&L


If later in the project I purchase a widget to add to my BOM, I do see that expense reflected in the P&L


At time of final invoice, I can now build the assembly complete with costs.  How does QB know to apply the correct total COGS considering the prior widget expense and invoices with $0 costs.


Is there a more appropriate way to invoice for down payments prior to having a completed BOM?



1 Comment 1
QuickBooks Team

Cost of Goods Sold with an incomplete BOM at time of down payment invoice.

Hi there, @ DaveE3.



Cost of goods sold (COGS) refers to the direct costs of producing the goods sold by a company. When you sell inventory items, you can run the Transaction Journal Report to see that the Inventory Asset account is credited and the COGS account is debited.


Bill of Materials (BOM) components never flow data to COGS unless the customer sells them individually. From the perspective of the assembly, the cost as asset value is still invested in asset value from the Build. There is no COGS event yet.


For your analysis, you can run the Inventory Valuation Summary since your BOM is incomplete. Once it’s completed, you can run the Profit & Loss report then the COGS won't be reflected. 


 You may check these articles that provide more insights on how QuickBooks handles inventory accounts and the average cost: 


Let me know if you have further concerns. I'd be glad to lend a hand. Keep safe and healthy.


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