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PolanskyConsulting
Level 1

Inventory purchases

I purchased inventory using the Expenditure screen, payable with a credit card.  I input the detail of the items I purchased in the Items section of the screen (the lower section).  The chart of accounts shows the value of the inventory but when I run a balance sheet report, there is no inventory balance shown.  The entire amount has been expensed to COGS.   For another item I purchased I used the Expenditure screen but used the Category section of the Expenditure screen (the upper section).  This amount is showing on the balance sheet report as an asset.  

Why is one purchase shown on the balance sheet correctly but the other was expensed immediately?  

When do you use the Category section of the Expenditure screen and when do you use the Item section of the Expenditure screen.

I set up the Products correctly, each has an asset account, an income account and a COGS account.

5 Comments 5
Mich_S
QuickBooks Team

Inventory purchases

Hi there, @PolanskyConsulting.

 

I can provide insights on when you can use category or item details when creating an expenditure in QuickBooks Online.

 

Category Details in QuickBooks Online (QBO) refers to the selection of an account from the company chart of accounts to categorize expenditure types (or non-expense type).


Item Details, on the other hand, mostly relate to items from the products and services list, such as inventory item purchases by quantity and unit pricing. When preparing job/project cost reports, it may also be useful for some job costing purposes.

 

 

Feel free to read this guide on how to handle sales and inventory in QBO: Group your products and services into different categories. This will also help you keep things organized in running reports.

 

Just hit the Reply button if you have other concerns with QuickBooks or reporting. The Community has your back. Take care always!

KimMcCPA
Level 6

Inventory purchases

I was able to replicate one item being shown in Inventory asset (on BS) and another in COGS (on P&L) from the same expense transaction, using the Item details section, and what made the difference was the item type.  Products classified as Inventory items will post to Inventory Asset when purchased, while products classified as non-inventory items will post to Cost of Goods Sold.  To check your setup:

 

Gear icon > Products and services

The products and services list will display

Skim the third column, TYPE, to see if any items are Non-inventory

 

When recording incoming inventory, either with a bill or an expense transaction, use the Item details section.  The Category details section doesn't pull up the Products and services list, and there is no quantity field, so no way to track by item or calculate FIFO.

PolanskyConsulting
Level 1

Inventory purchases

Thank you for the quick response.  The inventory items purchased are set up as Products of the "Inventory" type with a Current Asset account type.  I used the "Item Detail" section of the Expenditure screen so that I could keep track of the physical quantity and cost per item. 

When I look at the Chart of Accounts, the Current Asset accounts show the correct dollar amount for each item purchased.  When I click on "View Register" QBO shows the expenditure purchase transactions. (good)

When I look at the Products and Services screen I see the correct physical number of the items purchased. (good)

However, when I run a balance sheet, the inventory amount is not shown as an asset. (bad) and the P/L reflects the full amount as having been expensed. (bad)

Also, the Statement of Activity Detail Report shows the Expenditures have being recorded in COGS. (bad)

How can the Chart of Accounts register reflect the asset value but the Statement of Activity Report show the same amounts in COGS?

katherinejoyceO
QuickBooks Team

Inventory purchases

Thanks for coming back for more support, @PolanskyConsulting

 

As an additional insight, QuickBooks tracks the quantity and value of items that have a type of inventory and assembly. It also uses an inventory sub-ledger to track individual items, then updates the various general ledger accounts as required. 

 

The cost of goods sold (COGS) is used to record the cost side of invoices. Thus, its average cost is multiplied by the quantity sold then posted to this account. 

 

In your case, I'd suggest you drill down your transactions and items to ensure the associate accounts and categories are correct. You'll want to follow the steps shared by KimMcCPA

 

For future reference, check out this article to learn about the effect of inventory tracking on the reports: Impacts of inventory tracking on balance sheet and profit & loss reports.

 

Get back here if you have additional questions. We're always around to help you more. 

KimMcCPA
Level 6

Inventory purchases

Re your quote "When I look at the Chart of Accounts, the Current Asset accounts show the correct dollar amount for each item purchased..."

 

In the demo, "Inventory asset" is in the Chart of accounts, and appears on the Balance sheet, and is also the asset account assigned to Products tracked in inventory.

 

Here's the link to the demo, so you can compare its setup to yours.  Run it in an incognito window so that it doesn't log you out of your own QBO:

 

https://c23.qbo.intuit.com/qbo23/samplecompany/validated?SKU=7&arg=QBOA&companyId=1000&recievedTimes...

 

To check a Product for its asset account assignment:

Gear>Products and Services > click Edit on far right.

Product/Service information popup will display.   

In the Inventory asset account box, Inventory asset should be selected using the dropdown.  

 

When inventory is turned on, QBO automatically sets up an Inventory Asset account, and assigning Products that need to be tracked in inventory to any other asset account may produce unpredictable results.

 

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