How can I record the cost of a Good sold in a non inventory product?

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@tempodamft wrote:
My inventory is completely about non inventory products ex: candies. First: I register my inventory cost as an expense. Second: In my products and services I register the product as a non inventory product that don't allow me to register the cost of the god sold. Third: When I create the sale receipt, I register the ammount of the whole sale. When I create a report of P&L there is not a cost of goods sold. I don't know how to associate a cost of good sold to the sale of the non inventory product.

You can't have it both ways, you bought the candy and posted that purchase as an expense - you can not then post that expense again when you sell it.

COGS, when you fill out your business tax return means the cost of inventory sold, so it is best to not use that account when you are not stocking and selling inventory type items.  Create an expense account named Cost Of Sales, (COS) and use that instead of COGS

If you have QBO plus, you have the option with non inventory items to enter both the purchase expense account and the sales income account on the item screen.  Then you can use that item on the purchase and the cost will post to the expense account you selected on the item screen, same thing for the sales price will post to the income account you select.

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Is this how it works in QBO - if anyone can confirm:

1: create a non-inventory item and select income account and expense account (COGS)

2: when purchase, select the item and input unit and unit cost. What is the journal:

debt COGS 

credit cash

3: when sell, select the item, and input unit and price. Will the journal be: 

Debt cash/AR

Credit Income?

4: if the number of unit purchased is exact the same as the sell, then good. Otherwise, the extra will be reclassified as inventory at year end. 
The business mode is no inventory and production on order - so wondering would this be working? 

@RustlerThank you so much.  I have just spent the last 3 hours trying to find answers to this.  My husband owns a HVAC company and we do not keep inventory.  When he needs parts, or units, we purchase them at that time.  I was recording these purchases as an expense, while on invoices, I had the products listed as COGS.

You are the only one that could explain it to me in a way I can understand after all this time.  Now to get busy changing all of these accounts to be able to file our 1065 later today.

@Rustler 

Regarding "non inventory" items used for production, I had been entering them as COGS. If I entered them as Cost of Sales (expense) instead, would the balance on the Cost of Sales account be used for the "purchases" amount in the COGS formula used on the tax return?

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@AshL wrote:

@Rustler 

 

Regarding "non inventory" items used for production, I had been entering them as COGS. If I entered them as Cost of Sales (expense) instead, would the balance on the Cost of Sales account be used for the "purchases" amount in the COGS formula used on the tax return?

 

No it would not be part of the COGS calculation on the income tax return

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My business also has non-inventory items that we were recording in COGS but will now set up a Cost of Sales expense account instead. I use QB Pro Desktop and when I set up to COS expense account what tax line mapping do I assign it? 

Anyone have any idea what tax line mapping to use for Cost of Sales expense account to record cost of materials? I don't see anything relevant in the drop down list except for maybe Other Deductions: Supplies.

Thanks for getting involved with this thread, Diablo1.
 

To properly identify what tax line mapping you should use for a particular expense account, I'd recommend working with a tax professional. If you're in need of one, there's an awesome tool on our website called Find a ProAdvisor. All ProAdvisors listed there are QuickBooks-certified and able to provide helpful insights for driving your business's success.
 

Here's how it works:

1. Go to our Find a ProAdvisor page.
2. Use the City or ZIP search field to specify a location.
3. Select Find a ProAdvisor.
4. Browse through your results and find one that works best for the business. You can click on each ProAdvisor's profile to learn more information about them.
   
   

Once you've found an accountant, they can be contacted through their Send a message form:
 

1. Use the available text box to introduce yourself. Be sure to include details about which services you're looking for.
   
   
    
2. Enter your appropriate info in the Your name, Your email, and Your phone number (optional) fields.
   
   
    
3. Hit Send message.
   
   

You'll also be able to find many detailed resources about using QuickBooks in our help article archives.
 

Please feel welcome to send a reply if there's any additional questions. Have a wonderful day!