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Owner uses inventory after it is entered into QuickBooks

Hello, looking for some inventory help. I have used QB for services for many years but am now helping clients with product. I have watched several tutorials and read several manuals but cannot seem to get a consistent answer for "Owner use of Product-Removing from Inventory".

Client moved to QB pro 2012 desktop from excel this year.

We purchase items & put into inventory. We are still entering item inventory quantity from end of last year. Due to this we may have an item name but no quantity yet.

Our state requires use tax on removed items.

Owner removes item for personal use. I try to make inventory adjustment using "Adjust Quantity/Value on Hand > Adjustment Type > Quantity & Total Value".

I can adjust quantity & sometimes will have a negative quantity due to still entering inventory from previous year.  I cannot adjust value to equal what owner paid for items (this is the amount upon which use tax is calculated). I just get $0.00 or QB averages a negative amount & then the QB message cannot have a negative amount and an incorrect "Total Value of Adjustment.

Is there a simple way to adjust inventory quantity/value to show correct total & then what type of entry would I use to add use tax liability?

I tried a sales receipt as I saw on previous answered questions but I think an owner us of product should not affect account receivables?

Thanks to anyone who would be able to help!


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Best answer 12-10-2018

Accepted Solutions
Established Community Backer ***

if the company is taxed as a sole proprietor or partnersh...

if the company is taxed as a sole proprietor or partnership - inventory adjust, set the adjusting account to owner/partner equity drawing, lower the qty on hand.  The value at the lower right is subject to use tax if your state requires it, most do.

if the company is taxed as a corp, create and use a due from [name] current asset account as the adjusting account and then the owner/shareholder pays that amount to the corp

QB does not do use tax, a workaround I use is to enter a bill, select the tax vendor, use a use tax paid expense account and manually calculate the amount due and enter it, in the memo block I enter something about the transaction it is for

Qty & Value adjustments are rare, and should be used with caution and in the event of an audit you need to be able to show why you are changing asset value.  All adjustments in inventory use value

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Thank you both for your replies. I should have stated ori...

Thank you both for your replies.
I should have stated originally that owner is a sole proprietor, company is an LLC.
We are fine on all other bookkeeping, it is just that I am new to items.  Owner orders items using bulk amounts for best wholesale pricing, we receive items & enter into stock, but do not add a sell rate as selling prices vary.
Owner then removes some of the items for their personal use.  We need to show the lowered quantity & our state tax entity gave a ruling that these items are taxed at original cost, not value, for use tax.
My dilemma is how to show the items removed, I understand if we were discarding items it is at value but these are for owner use.
And when I try to adjust using "Adjust Quantity/Value on Hand > Adjustment Type > Quantity & Total Value" the quantity part works but not the value - this needs to be actual cost.
I do use the owner draw account for the "Adjustment Account" in the Adjust Quantity/Value on Hand screen.
Rustler, I understand the idea of a bill, but the owner is also paying the use tax thru the company so I need to show that as part of owner draw.  Would a GJE entry accomplish the same thing using owner draw/debit<>tax liability/credit?
So I am looking for the entries that show lowered quantity, correct value to owner draw, and sales tax liability. And I keep thinking there should be a simple answer! :smile:
Thank you again!
Established Community Backer ***

if the company is taxed as a sole proprietor or partnersh...

if the company is taxed as a sole proprietor or partnership - inventory adjust, set the adjusting account to owner/partner equity drawing, lower the qty on hand.  The value at the lower right is subject to use tax if your state requires it, most do.

if the company is taxed as a corp, create and use a due from [name] current asset account as the adjusting account and then the owner/shareholder pays that amount to the corp

QB does not do use tax, a workaround I use is to enter a bill, select the tax vendor, use a use tax paid expense account and manually calculate the amount due and enter it, in the memo block I enter something about the transaction it is for

Qty & Value adjustments are rare, and should be used with caution and in the event of an audit you need to be able to show why you are changing asset value.  All adjustments in inventory use value

View solution in original post

Not applicable

You state " We purchase items & put into inventory. We ar...

You state " We purchase items & put into inventory. We are still entering item inventory quantity from end of last year. Due to this we may have an item name but no quantity yet.
Our state requires use tax on removed items.
Owner removes item for personal use. I try to make inventory adjustment"
Just on the above you have various tax questions as to the business COS (tax deductions ) both if Schedule C or Corp tax return filing. not including  also "use tax" to your State.  A full review of you bookkeeping, costing,  financial and tax procedures must be done.
Established Community Backer ***

@ agd6 you say you are receiving items and there is no v...

@ agd6

you say you are receiving items and there is no value associated when you use an adjustment?
See this for a How To Receive Inventory Items. (desktop)
http://onsale-apparel.com/Rustler/tag/how2-rcv-inven
are you doing it that way?

Again stay away from adjusting value unless you have a very good reason, it is an audit magnet.  Just use a qty adjustment, that will adjust qty AND value - the name qty adjustment means that is what you are going to use to make the adjustment, it does not mean that qty is the only thing adjusted

If the owner is going to pay use tax, enter the bill, select the tax agency vendor and use owner equity or equity drawing as the account on the bill.

inventory adjustments are always at cost, whether you set a sales price or not has nothing to do with inventory stock average costing.


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Thank you Rustler! We are not using a PO. I enter the bil...

Thank you Rustler!
We are not using a PO. I enter the bill after items received using item tab.
We have items from end-of-year inventory last year that we are transferring to QB.

So the items purchased this year have name/quantity/cost. The items transferring to QB have name but not quantity/cost yet. I am still going thru old bills to find quantity/costs.  The owner is using products from old inventory & new inventory.

Per our state tax entity, the ruling they gave us was matched to "if purchase is made out of state & no sales tax paid at time purchase you are responsible for paying use tax at cost of item not value of item."

So if I try to use "Adjust Quantity/Value on Hand > Adjustment Type > Quantity & Total Value" the value in the right hand corner does not accurately reflect the total upon which use tax must be paid.

The owner uses $200.00 worth of products, this is the taxable amount, the use tax is $16.75. I must show the owner draw as $200.00 and the owner draw use tax as $16.75.
Established Community Backer ***

POs are optional as I stated in the example If you do no...

POs are optional as I stated in the example

If you do not have cost for an item in inventory because you are still trying to get it entered, then of course you can not get cost for that item out during an adjustment

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