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POS/Quickbooks Inventory as COGS rather than asset

I am new to POS and use Quickbooks for financial accounting. I have always entered inventory as COGS however with POS the software has established purchased inventory as an asset. My bookkeeper states this is typical in accrual accounting and inventory as COGS would be cash based accounting. I have read various opinions where both methods are the authors preferred choice. Can I use POS with Quickbooks and instruct the software to place inventory as COGS rather than inventory assets. Expert opinions from those you have tried this are appreciated.
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Best answer 09-09-2019

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QB and QB POS use perpetual inventory, what you are descr...

QB and QB POS use perpetual inventory, what you are describing is one method of periodic inventory.

No you can not change the way QB treats inventory as an asset, if you want to use inventory items

Which method of inventory, perpetual or periodic, that you use has nothing at all to do with accrual or cash based, your bookkeeper is wrong.

In periodic, if you post all purchases to COGS, at the end of the year you are faced with valuing the inventory still on hand and moving that on hand value to an asset account for income tax reporting, then after the income tax reporting is finalized moving that value back to COGS for the next years accounting.  (that is what should be done since what is not sold, is not an expense yet)

In perpetual, the value is held as an asset, and only posted to COGS when a sale is made, cost is maintained based upon purchases as they happen.  At the end of the year all you have to do is a physical inventory to adjust to a COGS-loss account items that are missing, damaged, spoiled, etc.

Logically, what you buy is yours, an asset.  It is not an expense until it is sold or used in the business.

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Highlighted
Established Community Backer ***

QB and QB POS use perpetual inventory, what you are descr...

QB and QB POS use perpetual inventory, what you are describing is one method of periodic inventory.

No you can not change the way QB treats inventory as an asset, if you want to use inventory items

Which method of inventory, perpetual or periodic, that you use has nothing at all to do with accrual or cash based, your bookkeeper is wrong.

In periodic, if you post all purchases to COGS, at the end of the year you are faced with valuing the inventory still on hand and moving that on hand value to an asset account for income tax reporting, then after the income tax reporting is finalized moving that value back to COGS for the next years accounting.  (that is what should be done since what is not sold, is not an expense yet)

In perpetual, the value is held as an asset, and only posted to COGS when a sale is made, cost is maintained based upon purchases as they happen.  At the end of the year all you have to do is a physical inventory to adjust to a COGS-loss account items that are missing, damaged, spoiled, etc.

Logically, what you buy is yours, an asset.  It is not an expense until it is sold or used in the business.

View solution in original post

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