Farm inventory

Good afternoon, @Rick7.

Thank you for reaching out to the Community. I'd be glad to lend a hand and provide you with information on adding inventory after its harvested.

I'd first reach out to your accountant to be sure that your books are accurate.

In QuickBooks Desktop, there are two ways of accounting method, and that's Accrual and Cash. That data on your reports are based on the preferences you've set in the system and the information you've recorded.

Cash basis is:

• A bookkeeping method in which you regard income or expenses as occurring at the time you receive a payment or pay a bill.
• The report only shows income if you have received cash and expenses if you have paid cash.

Accrual basis is:

• The accounting method, the time when you enter a transaction and, the time you pay or receive cash may be two separate events.
• The report shows income regardless of whether your customers have paid your invoices and expenses regardless of whether you have paid all your bills.

To set your preferences in QuickBooks Desktop:

1. Login to your company file as the Admin and make sure to be in Single-User Mode.
2. Select the Edit menu and go to Preferences.
3. Click on the Reports & Graphs, pick the Company Preferences tab.
4. In the Summary Report Basis section, choose Accrual or Cash.
5. Go to OK.

That's all for it. For additional information about Accounts Receivable workflows, refer back to this article: Accounts Receivable workflows in QuickBooks Desktop

Let me know if the information provided does the trick. If you have any more questions or concerns, I'm only a few clicks away. Happy Tuesday!

Hi Kendra_H,

Thank you for your reply.

I run my business on a cash basis, and I understand how to set the preference. I also understand the A/R workflows.  I run a farm and a manufacturing business. The books are all on one set in QB. I use the "class" tag to differentiate for business decisions but file a single tax return for my Sub S Corporation. I want the inventory for both sections of the business to be accurate. The manufacturing side is working well.

Here is my question for the farm inventory: How do I value the inventory to market value?

Example:  I create a Purchase Order for a dummy account called "Farm" at $0.00 price and 250 pounds quantity. I pay for the PO with a check for $0.00. I now have 250 pounds of product on the shelf at zero value. I want to change the value to market value using the "change inventory" drop down: new value is $1,000 for 250 pounds of product. Since this transaction increasing the current asset value must have a corresponding transaction on the liability side to balance the Balance Sheet, I want to know which account gets the credit.  I know that showing "inventory shrinkage" through the same mechanism can either credit the assinged COGS account or credit an expense account specifically for inventory adjustment. I do not want to use either account as this is specifically 'marking to market'.  All of the expenses of producing the farm product are accounted for in general expense accounts. We do not keep a COGS account for farm products.

Maybe the answer is simply don't worry about this. Take the inventory in at zero value and only show a value through the revenue from a sale.  This is the essence of cash accounting, but it seems that it is grossly undervaluing the business by carrying inventory at zero value.

If you use QuickBooks for single-entry cash basis accounting you can set up an Equity account for "throwing away" the parts of double-entry transactions you don't want. (I have one called Adjustments & Offsets.) You can use it as the offsetting account for Inventory Part Item value adjustments, etc. Assigning market values to farm inventories and fixed assets using that approach is discussed in a couple different books in the QuickBooks Farm Accounting Cookbook series.