Turn on suggestions
Auto-suggest helps you quickly narrow down your search results by suggesting possible matches as you type.
Showing results for
Hello,
I fall under the TCJA exception to the accrual method for inventory (we meet the gross receipts test and treat inventory as nonincidental materials and supplies). When setting up my CoA, do I set up an inventory account under "expenses", or would I set up inventory as "other current assets"? Using QBO
When I make a sale of the inventory item, how will QBO make this journal entry? Will there be a COGS account, or will it just go straight to a revenue account? I just want to make sure that I set up the CoA correctly.
Thank you!
I'm happy to help you every step of the way in handling your inventory accounts, @Leethecat.
Let me explain everything you need to know about how inventory works in QuickBooks Online. This way, I can guide you accordingly in handling your items.
QuickBooks will auto-create two Charts of Accounts (COA) when setting up the first inventory item. These are:
For more details, see this article: Manage default and special accounts in your QuickBooks Online chart of accounts.
Though you can set up accounts other than the default ones for inventory. This way, you can personalize your COA. But, I'd recommend consulting an accountant for further guidance on this matter.
Once ready to create a COA, click this link for the step-by-step instructions: Add an account to your chart of accounts in QuickBooks Online.
Additionally, if you record a sales side of an invoice and the item is sold on its sales price multiplied by the quantity sold, this is posted to the Sales/Income account. Please note that Journal Entry is not advisable for product/service inventory items. I recommend following this article's procedure: Set up and track your inventory in QuickBooks Online.
Moreover, read this article to learn how inventory impacts your financial report: Impacts of inventory tracking on balance sheet and profit & loss reports.
Furthermore, check out these articles below to learn how QuickBooks handles your inventory accounting and other frequently asked questions to help you manage your items:
Let me know if you have other questions about this. Have a good one! I'll be right here if you need anything else.
If you qualify for the exception (see link below), then you should not be tracking inventory and should expense it immediately upon purchase. If you treat inventory purchases as "non-incidental materials and supplies", you can no longer track it because you will have to post the purchases to an expense account, not an inventory asset account.
The TCJA gives you the option to account for inventory as either: 1) non-incidental materials and supplies (this means you do not track inventory) or 2) as conforms to your method of accounting. If you want to track your inventory in QB, then #1 no longer applies because your method of accounting does not treat your inventory as a non-incidental materials and supplies expense. If you track it, then #2 applies and you're right back to where you started as an accrual basis taxpayer. I think, initially, people thought this was a major benefit to small business taxpayers that met the income threshold but I don't think that's the case.
This link is the best I've found on the subject:
https://notyourdadscpa.com/can-i-deduct-inventory-when-i-purchase-it/
You have clicked a link to a site outside of the QuickBooks or ProFile Communities. By clicking "Continue", you will leave the community and be taken to that site instead.
For more information visit our Security Center or to report suspicious websites you can contact us here