What expense account do I enter my inventory purchases off my credit card? Also which category would you enter shipping charges/fees under?

stacey2 · ‎October 15, 2018

There is no cost of goods sold on my version of online quickbooks.

Rustler · ‎October 15, 2018

@ stacey

inventory is only in QBO+, if you have plus, then COGS will show up in the chart of accounts when you enable qty tracking (inventory) in company settings

Other wise as Malcolm stated you have to use periodic inventory if you have essentials

There are two ways to do periodic inventory, choose one and stick with it, you can not mix and match

1. (my preference) Create an asset account called purchases and post all purchases of item for resale to that account. Periodically, weekly, monthly, etc value the inventory on hand, subtract that value from the amount shown in the purchases account and do a journal entry for the answer to the subtraction
debit COGS for that value
credit purchases for that value

OR

2. Post all purchases to COGS. Periodically, but at least at the end of the year, you value the inventory on hand and do a journal entry.
debit the asset purchases account for that value
credit COGS for that value

Print the P&L
then reverse the journal entry
debit COGS for that same value
credit the asset purchases account for that value

This last journal entry, moves the value of what was on hand at the end of year back to COGS so the cost will be counted against the new year sales.

View solution in original post

Rustler · ‎October 15, 2018

@ stacey

inventory is only in QBO+, if you have plus, then COGS will show up in the chart of accounts when you enable qty tracking (inventory) in company settings

Other wise as Malcolm stated you have to use periodic inventory if you have essentials

There are two ways to do periodic inventory, choose one and stick with it, you can not mix and match

1. (my preference) Create an asset account called purchases and post all purchases of item for resale to that account. Periodically, weekly, monthly, etc value the inventory on hand, subtract that value from the amount shown in the purchases account and do a journal entry for the answer to the subtraction
debit COGS for that value
credit purchases for that value

OR

2. Post all purchases to COGS. Periodically, but at least at the end of the year, you value the inventory on hand and do a journal entry.
debit the asset purchases account for that value
credit COGS for that value

Print the P&L
then reverse the journal entry
debit COGS for that same value
credit the asset purchases account for that value

This last journal entry, moves the value of what was on hand at the end of year back to COGS so the cost will be counted against the new year sales.

Malcolm Ziman · ‎October 15, 2018

"Create an asset account called purchases " - this is not generally accepted usage.
I have not heard of Purchases being an asset account. It is a COGS account. It shows on the P&L not on the balance sheet. "Inventory" is the name of the asset account.
The word Purchases is a dynamic word, while the word Inventory is static. So the value for Purchases is a measurement over time. The value for Inventory is at one moment in time. The values on the P&L are dynamic and the B/Sheet is static.

Rustler · ‎October 15, 2018

Generally accepted usage
what is then?

and who controls generally accepted - and generally that means not accepted universally, like the so called GAAP standard, Generally Accepted does not mean a standard and gaap is not required unless you are listed on the stock exchange. last I counted there were eight (8) so called accounting standards.

I said asset account called purchases - an accurate description of what is held in that asset account

There are two ways to do periodic
one way your purchases are an asset, the other you expense them all
Asset - later periodically you adjust the purchases to cogs for what was sold - the P&L is accurate at that point
or
expense - later periodically you adjust cogs and move value to an asset - at that point the P&L is accurate

at NO other time in periodic inventory is the P&L accurate

Malcolm Ziman · ‎October 15, 2018

It's just that Purchases is not an asset - it's called Inventory - you know that. Otherwise, great analysis.

Rustler · ‎October 15, 2018

I use a different name, my option there is no rule
And I use that name to insure the user does not use inventory asset, since that account is a special account inside of QB.

What an account is named has nothing to do with what the value being accounted for represnts. The name also reflects the type of activity - how much more specific can you get in a name
purchases = implies you bought something to the most casual observer.
I guess we will have to agree to disagree on naming conventions

Malcolm Ziman · ‎October 15, 2018

If you don't want QBO to track inventory you can debit a COGS account called Purchases for all inventory purchases, and shipping in. Then at month-end or year-end whenever you want to produce financial statements, you would do an inventory count and create a journal entry where you adjust between a current asset Inventory account and a COGS account called "Change in Inventory", so that the asset account shows the inventory value at cost as per the count (the change in inventory value between the current and previous period end - could be positive or negative)

vpcontroller · ‎October 15, 2018

TIP:

If you're adopting "Periodic Inventory" method do not select "Inventory as Detail Type" in the Chart of Accounts. Instead use Other Current Assets for detail type and for the category type also select the same. For the name, you never want to use "Inventory Asset", this happens to be default account name designated for perpetual inventory tracking in QBO. If you want to switch later, it creates problems.

"Purchases" name on the B/S (as suggested by Rustler) works fine.

Malcolm Ziman · ‎October 15, 2018

Purchases is not a B/S account

vpcontroller · ‎October 15, 2018

@Malcolm Ziman What matters most on the Balance Sheet is accurate account Type. There is no issue with title names like purchases, prepaid expenses, and deferred charges on the Balance Sheet. If they don't like a name they can always rename as they want. Thank you for the discussion and input.

Malcolm Ziman · ‎October 15, 2018

The word Purchases is a dynamic word, while the word Inventory is static. So the value for Purchases is a measurement over time. The value for Inventory is at one moment in time. The values on the P&L are dynamic and the B/Sheet is static. It would be totally incorrect to use the word Purchases on a balance sheet. It does not makes sense to ask: "What were the Purchases at Dec 31st?", just like it does not make sense to ask "What were the Sales at Dec 31st?"

letsinm · ‎October 05, 2019

I agree with you Rustler.

Purchasing is a proper account name (conventional for a periodic system). "Inventory Purchases" are assets until it expensed (assigned to COGS). You do not recognize or realize the expense until the inventory is sold (moved to COGS). COGS appears on the income statement not the B/S.

Mark

vpcontroller · ‎November 14, 2019

fgabby1 · ‎January 31, 2022

I agree, the term Purchases is not an asset account. It's part of COGS

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What expense account do I enter my inventory purchases off my credit card? Also which category would you enter shipping charges/fees under?