BACKGROUND:
We’re a Just-in-Time manufacturing company using QB Desktop for Mac - inventory is not tracked in QB. All materials are set-up with cost used for purchase orders and tracking of COGS so that expenses are properly tracked and so that the P&L is accurate. We receive the purchase order, enter a bill against the purchase order and pay the bill through QB.
Some of our materials in the items list are set-up as inventory parts, while others are set-up as non-inventory - this was done out of not-knowing how each affects the books and I’m still not well versed on how each affects the books in totality. We’ve been making monthly general journal adjustments to the inventory asset account (bringing it to zero) for accurate financial reporting as this is what our accountant told us to do. We track inventory for all individual components/materials outside of QB.
PROBLEM:
While we don’t track inventory in QB, we create, receive and pay for purchase order’s through QB so the item part numbers are needed. In reviewing the COGS section on our P&L, I’m seeing that non-inventory items show up, however inventory items do not. Should the items all be non-inventory items? Where on the P&L does the expense for inventory items show up? I’m concerned that these expenses are not be accounted for in reporting expenses for tax purposes, as I can’t find where they are being accounted for.!.! Are the inventory items not showing up because an invoice has to be created and once the payment of that invoice is received and entered into the books, the inventory item shows up under COGS on the P&L?
Through my research and testing in QB, I’m seeing that it appears all of our items should be categorized as non-inventory items so that the COGS on the P&L is accurate.?.? The COGS on the P&L is currently inaccurate because some of our items (that are COGS items) are set-up as inventory parts which does not fall under COGS on the P&L until an invoice and payment for that invoice is applied to the books (I think that’s how this part of QB’s works), which we can’t do as that would in-flat our income, because our income is ALREADY keyed as one group deposit to the checking account, daily, from our online store or anyone of our other merchant centers, which is where all of our individual sales are recorded. My testing in QB shows that when you create an invoice and receive payment against that invoice, the system increases your income account by the amount of that sale - we don’t want that as we’ve already recorded the income from the one group deposit, made daily to the checking account.
If all of our items should be non-inventory items, I’m seeing that an inventory item can NOT be changed to non-inventory. What is the best solution for our currently categorized inventory items? Do we create all new items for them and categorize them as non-inventory? Is there anything I’m missing that would have a negative affect on our books by doing this?
