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I understand that QB creates the inventory asset and COGS account, and I can create the income account. What I dont understand is how it gets from inventory asset/COGS to the income account. I am going to try and use the manual method of inventory tracking, so is there a journal entry that i will have to do to get dollars into the income account?
Hello there, Lisa Ferguson.
I'd like to discuss to you how Inventory Assets and COGS tracking works in QuickBooks Desktop.
Yes, you're correct. QuickBooks automatically adds two accounts (Inventory Asset and Cost of Goods Sold (COGS) when creating your first inventory item. These items requires an income account.
Since you want to try the manual method of tracking inventory, then here are the accounts you can use get dollars into the income account:
If the item is purchased, use Inventory Asset and Bank. If it's a sale, use Inventory Asset, COGS, Income and Bank.
This article will help you learn more about Inventory Assets and COGS tracking in QuickBooks Desktop.
Of course, I would still suggest consulting guidance from your accountant to know the correct accounts to be used.
You can always let me know if you have other questions or clarifications and I'd be glad to answer for you.
Thank you sooooo much for your prompt response. It was of great help. For now I think I'm fine, but if you wouldn't mind if something else comes up on this matter, I will email you. Thank-you again for your help.
I don't understand the income account. Our inventory never hits our sales. I get the income for the purchase hitting the bank, but that would be done via A/P, and the income from the sale is done on the invoice, so I don't understand why an inventory item is hitting an income account.
Thanks for following on this thread, edc9500.
When you turn on the Inventory feature in QuickBooks, it automatically adds the Inventory Asset - Other Current Asset and Cost of Goods Sold (COGS) - Cost of Goods Sold. By the time you set up an item, select an income account to easily track the items sold.
Also, income is realized when there’s a sale for the product (recorded on an invoice or sales receipt). QuickBooks then decreases what’s on hand by the amount on the transactions. For more insights on how QuickBooks handles your inventory and accounts associated for an item, see the following guides:
If you have any clarifications or other concerns, click the Reply button and post a comment. I’ll be right here to help you. Have a great rest of the day.