Chart of Accounts for cash basis inventory

 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:

• Inventory Asset/Other Current Asset Account- used to track inventory values on hand.
• Cost of Goods Sold (COGS) - used to record the sales side of invoices. When an item is sold, its sales price multiplied by the quantity sold is posted to this account.

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: 

• What is FIFO, and how is it used for inventory cost accounting?
• Manage inventory in QuickBooks

Let me know if you have other questions about this. Have a good one! I'll be right here if you need anything else.

@Leethecat 

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/