How Do I Distinguish Between Supplies and Materials - COGS/Inventory/Supplies & Materials?

Let me share some insight between COGS, Inventory, Supplies & Materials, crtj51623.

In QuickBooks Online, you can distinguish between supplies and materials by categorizing them appropriately under COGS (Cost of Goods Sold), Inventory, and Supplies & Materials. Here's how you can do it:

COGS (Cost of Goods Sold): COGS represents the direct costs associated with producing goods or services. It includes the cost of raw materials, direct labor, and other direct costs related to producing or acquiring goods or services.

Inventory: Inventory represents the products or goods you purchase, produce, and plan to sell.

Supplies & Materials: Supplies and materials are items used in your business that are not intended for sale but are consumed during operations.

With regards to categorizing the milk and the bowls used to pack the iced product as follows:

Milk:

• Since milk is an ingredient in your iced product, you should record it as an expense under the "Cost of Goods Sold" (COGS) account.
• To do this, go to Chart of Accounts.
• Click New and select Cost of Goods Sold as the account type.
• Name the account Milk or provide a relevant name that describes the expense.
• Tap Save.

Bowls:

• The bowls used to pack the iced product can be categorized as a supply or packaging expense.
• To categorize the bowls, create an expense account called Packaging Supplies or Bowls under the "Chart of Accounts."
• Go to Chart of Accounts and click New.
• Select Expenses as the account type and name it Packaging Supplies or Bowls.
• Click Save.

However, I suggest consulting with your accountant to help you categorize the correct account and ensure the accuracy of your books.

For additional reference, I recommend checking these articles:

• How to set up Inventory tracking
• How to use Inventory products, Services, or non-inventory products
• Impacts of inventory tracking on balance sheet and profit & loss reports

Please let me know in the comment section if you have any follow-up questions regarding COGS, inventory, materials, and supplies. I'm always here to answer them. Take care and have a good one!