Inventory assets and sales both showing as income?

Your confusion ends here, @Alicia20.

Allow me to fill you in on everything you need to know about how QuickBooks tracks inventory assets.

You'll want to know that the cost of purchase is always posted in the inventory asset. QuickBooks will only post in the Cost of Goods Sold (COGS) once a sale is recorded. You can run the Balance Sheet report to keep track of your inventory assets associated with your inventory items. Here's how:

1. Sign in to your QuickBooks Online (QBO) account.
2. Click Reports from the left menu.
3. Search for the Balance Sheet report.
4. Look for the Inventory asset account and review the information.

I'm adding these articles to learn how inventory tracking affects QuickBooks:

• Impacts of inventory tracking on balance sheet and profit & loss reports.
• Learn common accounting terms.

Just in case you want to learn more about setting up and tracking your inventory in QBO, you can read this article for more details: Set up and track your inventory.

Please let me know if you need clarification about this, or there's anything else I can do for you. I'll be standing by for your response. Have a great day.

Thank you! I do have a follow-up question. The Square sales have been imported into QBO and I reviewed one sale as a test and created a sales receipt for it. The sale ($26.94) still shows up on the Balance Sheet report as "undeposited funds" under assets. When I check the COGS section of the P&L detail report, I also see the full amount of the transaction $26.94) there.

1) Is it normal for the sale to show under assets on one report and a liability on another? And with the same amount?

2) Should these sales be falling into that undeposited funds category? I know there are some items that get categorized automatically and need to be changed - is this one of those kind of things?

3) If so, what would I change it to?

I tried a few more transactions and it appears that my non-taxable labor charges are showing up under the liabilities, it's the inventory income that is showing up in undeposited funds (if this extra info helps at all). Thanks again!

Joining the thread to share some more information about this topic, @XL_Velo,

QuickBooks Online uses the Sources and Targets concept for reporting. When you create an item for your invoices, the source of the information is the Products and Service page where you initially assign accounts.

These accounts you assign to the items or categories on transactions will determine the transaction journal posting.

Since the entry will use the data from its source, you need to check the accounts used on the items. You can follow these steps to check the assigned accounts:

1. Tap Settings ⚙ and select Account and settings.
2. Go to the Sales tab.
3. Press Edit ✎ in the Products and services section.
4. Look under the Income account ▼ drop-down and find the account you use to track what you sell.
5. You can also check the Expense account ▼ drop-down, and see what account is used. Normally, Cost of Goods Sold is used there. QuickBooks uses this account to track the cost of products you sell.

6. Once done, press Save and close.

Learn more about inventory tracking using the links below:

• Set up and track your inventory in QuickBooks Online
• Add inventory products in QuickBooks Online 

Regarding the Undeposited Funds posting try to check if there are sales that are not yet deposited to the register. Normally, QuickBooks will use the U/F account to hold funds before they are deposited. To learn more about this, kindly refer to the steps below in this article: Deposit payments into the Undeposited Funds account in QuickBooks Online

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