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Level 1

Creating Inventory Items: Income Account question

I'm a new user.  I'm slightly confused.  When creating an "Item," under the drop down of "income account," should I use "proceeds from sale of assets" or "inventory asset"?  I was watching a tutorial and I saw that they used "inventory asset" for the income account.  To me, it doesn't make sense since it's asking for and income account.  So confused.  What should I use?
Solved
Best answer 12-10-2018

Best Answers
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Level 15

Creating Inventory Items: Income Account question

Inventory and assembly items have three accounts
expense = COGS
income = your sales income account
asset = inventory asset

any video or advice you received showing an asset account selected in the income account selection is wrong.

The inventory help files and video tutorials are helpful. QuickBooks for Dummies, and Business Accounting for Dummies are great books. There is  also a lot of information on my blog, and several "How 2" articles on the basics. QB is an accounting program and has a steep learning curve regardless of what the PR says.

In preferences>Items & Inventory>Company tab check mark that inventory & purchase orders are active, when you create the first inventory item, QB will create the inventory asset and COGS accounts, and then go for it in a test file first.

Inventory if mis-entered or mismanaged can be the worst thing to try to correct that there is in QB.

View solution in original post

8 Comments
Level 4

Creating Inventory Items: Income Account question

Its an Income type account normally called sales as its what you sell, You can name it what you want but normally sales goes to sales but there is no reason why you cannot break it down like "Inventory sales" or "capital equipment sales or "resale sales" etc etc.
However there are also reports that you can use to break down sales if required using other methods.
But its what you want tthat matters and no one knows your business like yourself.
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Level 1

Creating Inventory Items: Income Account question

Thank Graceman
Highlighted
Level 15

Creating Inventory Items: Income Account question

Inventory and assembly items have three accounts
expense = COGS
income = your sales income account
asset = inventory asset

any video or advice you received showing an asset account selected in the income account selection is wrong.

The inventory help files and video tutorials are helpful. QuickBooks for Dummies, and Business Accounting for Dummies are great books. There is  also a lot of information on my blog, and several "How 2" articles on the basics. QB is an accounting program and has a steep learning curve regardless of what the PR says.

In preferences>Items & Inventory>Company tab check mark that inventory & purchase orders are active, when you create the first inventory item, QB will create the inventory asset and COGS accounts, and then go for it in a test file first.

Inventory if mis-entered or mismanaged can be the worst thing to try to correct that there is in QB.

View solution in original post

Highlighted
Level 1

Creating Inventory Items: Income Account question

Thank you Rustler.  Much appreciated.  You make it sound so easy.  Funny thing was I saw the video on this site.  Anyway, you were a lot of help.
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Level 15

Creating Inventory Items: Income Account question

You're Welcome
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Level 1

Creating Inventory Items: Income Account question

Hi,

 

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?

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QuickBooks Team

Creating Inventory Items: Income Account question

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.

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Level 1

Creating Inventory Items: Income Account question

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.

 

Lisa

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