Inventory vs. non-inventory and COGS

@VTXtools 

You are doing it properly.  The products are not inventory for you, they are inventory for your vendor.  Two businesses cannot claim inventory on the same product.  The bottom line is that if you do not have title to the products, they are not inventory.  You can still book the cost of them to a separate expense account and see your margin(s).  Just record the cost of the products to a dedicated expense account when billed from your vendor.  You will not have the QB inventory reporting features because they are non-inventory items, but it is the proper way to record it.

Just to make sure I understand correctly, I should set up a sub COGS account for the product and then link the product to that particular COGS account and that would allow me to track that product outside of just the general COGS. I must be missing something as even after I have isolated a non-inventory item to its own sub COGS expense account I still am not able to view a margin for it when I run a report for sales by product/service summary.

@VTXtools 

COGS is an expense account used only when inventory items are sold.  You should use a non-COGS expense account(s) and calculate your margin manually.  You aren't missing anything - QB cannot connect the cost of the item to the sale of the item for non-inventory or service items and, therefore, cannot give you a profit margin for non-inventory and service items. 

Since my non-inventory items have the cost account as COGS it should still dump the associated cost back in to COGS, correct? It's just not being applied to that particular item but just dumped in to the general pool of COGS. So my overall COGS total is still accurate, I just can't pull margin by individual non-inventory items.

@nmballa 

Correct, but COGS should not be used with non-inventory items.  COGS is an expense account that is used to expense the cost of inventory items at the time they are sold.  If you report COGS, you need to file Form 1125-A with your tax return or complete the COGS section in Part III  of Schedule C on your 1040.  Either way, COGS is calculated using the beginning and ending (of the tax year) inventory values.  If you have no inventory, you should not have COGS.  Instead of using COGS, you can use another expense account like Cost of Sales or Materials and Supplies. 

I am very late to this conversation but having the same issue.  I'm struggling to find a report that gives sales & cost for non-inventory items.  I understand how inventory works & how COGS works, however it is necessary to view sales & cost on non-inventory items as well.  It seems like a simple report but just not a quick report in QBO as of now.  I hope with some feedback this will be addressed soon.  I found under reports>bus overview>custom summary report>display rows by product/srv & display columns by income statement might be a report to export to Excel & remove all columns except sales & whatever account the products are expensed in.  This results in four simple columns - product name + income + expense = gross profit (in my case).  Hope you find this report helpful and I hope QBO gives us more reporting for non-inventory products in the near future.

And in this instance what income account should I assign?

The report will list all the income statement accounts and you can remove all the accounts except the income & expense accounts that are assigned to the products/items.  Mine is simple because I use one income account and one COGS account for all products/items.  I set up a COGS account to track the cost even though these are non-inventory items the owner wants to see the cost in COGS.  Review your products/items list to see which income and cost accounts are assigned.  Hope this works for you too.

And by the way, I name my COGS expense account "materials cost-non inventory" so there is no issue when the CPA reviews the financials.  The COGS account is not associated with any inventory in this situation/company.  Hope this helps........