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How do I account for internal use of an inventory item?

I have a quilt and embroidery supply shop. I frequently take fabric and threads from store inventory to create models for display in the shop. Currently, I am selling them to myself (as a person) at cost. I'm a sole prop, so really, I'm only moving money from one pocket to another, so it works, but I'm sure it's not the best way to do this. How should I really be doing this?

This should be equivalent to an office supply store taking a box of paper, staples, etc., from their shelf to use in the store. I'm just not sure how this really should be done

I use QB POS Pro 12.0 and sync it to QB Premier Plus Retail 2016.

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Best answer 09-09-2019

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Established Community Backer ***

No you should not be selling to yourself I do not use POS...

No you should not be selling to yourself

I do not use POS so you will have to find and use inventory adjust and select the adjustment account for demo expense or shop use expense, what ever you have set up and lower the qty on hand

The value of the adjustment is subject to use tax if your state requires it, most do.

12 Comments
Not applicable

My state doesn't have sales tax, so tax on items used int...

My state doesn't have sales tax, so tax on items used internally isn't a concern. So, selling to myself works, but I know that's not how it should be done. Can anyone else give me further advice?
Not applicable

this should be a "c.o.g.s" cost of goods sold, but im not...

this should be a "c.o.g.s" cost of goods sold, but im not familiar with your version of qb
Established Community Backer ***

No you should not be selling to yourself I do not use POS...

No you should not be selling to yourself

I do not use POS so you will have to find and use inventory adjust and select the adjustment account for demo expense or shop use expense, what ever you have set up and lower the qty on hand

The value of the adjustment is subject to use tax if your state requires it, most do.

Not applicable

My state doesn't have sales tax, so tax on items used int...

My state doesn't have sales tax, so tax on items used internally isn't a concern. So, selling to myself works, but I know that's not how it should be done. Can anyone else give me further advice?
Not applicable

OK, I found the inventory adjustment screen in POS, but I...

OK, I found the inventory adjustment screen in POS, but I don't have an account or reason there for demo or shop use. Can I add reasons to the screen?
Established Community Backer ***

You create the account, expense account, you need in the...

You create the account, expense account, you need in the chart of accounts and name it, if you do not have an expense account already for what ever purpose the item is being used for.

as an example if you sell floor wax, and you were going to take one can out of inventory for office use, use office expense as the adjusting account
Not applicable

My inventory is in POS, not QB financial, so I'm not deal...

My inventory is in POS, not QB financial, so I'm not dealing directly with the Chart of Accounts.

In POS, I have found the inventory adjustment function. I have to choose a reason for the adjustment, and my choices are Shrinkage, Damage, and a couple other things which I don't remember off the top of my head. None of the choices are Demonstration or Internal Use.

I need to do one of two things: (1) create a new reason, and then figure out how to assign this new reason to sync to the correct account in QB financial. Or (2), I need to more fully understand what all is included in the term "Shrinkage." I know Shrinkage includes loss by theft, but does it also include internal use or demonstration? When I Google the term, it seems as if Shrinkage is a bad thing to show in the books, and I don't think Demonstration or Internal Use classify as bad things.
Established Community Backer ***

Shrinkage is a normal aspect of inventory, and is only "b...

Shrinkage is a normal aspect of inventory, and is only "bad" if it is excessive.  Shrinkage mostly means loss by theft or another reason.

Sorry I missed POS as being used and have no idea what you would need to do in POS.  Have you tried to create a new reason in POS?
Not applicable

Yes, I tried to create another reason in POS, but I could...

Yes, I tried to create another reason in POS, but I couldn't figure out how. But, there is a comment field where I can note that it's for a shop model, and use shrinkage as the reason, I guess.
Not applicable

I'm in the same boat, can't find where you can assign an...

I'm in the same boat, can't find where you can assign an expense account number (for QB)  to an inventory adjustment account in POS?
Not applicable

I created expense account and put on my inventory for own...

I created expense account and put on my inventory for own consumption on it. Now QB thinks im buying up more! instead of using it myself... pls help
Not applicable

I use discounts.  A 100% discount for internal use.  Run...

I use discounts.  A 100% discount for internal use.  Run the discount report at month end and claim the extended cost as the office supply and/or to pay use tax.

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