Exclude Raw Material cost from Finished item in Purchase Order.

it requires a work around

when you send inventory to the third party processor, use inventory adjust, set the adjusting account to a clearing expense account (create one if you need to)

when you get the bill from the third party processor

1. in the item details part list the finished inventory item, qty, and the total amount of the third party bill PLUS the amount in the clearing expense account

2.  move to the account details part of the bill, select the clearing expense account and enter that amount as a negative number (the balance in the clearing account)

the bill will now net to the original bill amount, pay the bill when ready.

Thank you for reply.

What we have done currently is that,

While creating Finish Purchase order we have added another line item "Exclude Raw Material" which we created as "Service" in product listing. We have checked this service as "I purchase this product/service from a vendor" and have set an expense account called as "Exclude Raw Material". In Purchase order we have set the amount in negative for it. This leads to the total payment to vendor is only the manufacturing cost. So what we have done is right or we need to make any modification. 

I was also looking for something called as "Vendor credit". Can Vendor credit be better solution to this problem. 
I have very less knowledge of Accounting. So i don't know where and what thing go. Any help would be helpful.  

Hi there,  

I see that another user has already answered your question, but I was going to suggest checking out the QuickBooks App Store for a solution.  

If you use an inventory management app like Katana, you can easily separate your inventory so when a third-party company is used to complete your manufacturing, you can easily track their processes from your warehouse and track those costs. Then, once the final product is completed, you can easily push your receipts and invoices back to QuickBooks to easily track your finances.