Trying to distinguish between an Expense and an Inventory purchase. When I set up a Vendor there is not Account selection for Inventory. How do I do this?

Thanks for choosing QuickBooks Online (QBO) to cater to your business needs, Jeff. I'd be delighted to help you purchase an inventory item.

The proper way to buy an item in QBO is by creating an inventory product and generating a purchase order (PO). After that, use the PO to create a bill. By doing so, QuickBooks will automatically increase the quantity on hand.

I'll lay down the step-by-step guide to achieve this and track the products accurately.

First, let's add the inventory item. Please note that this option is only available in Plus and Advanced. Consider upgrading your plan (if you have Simple Start or Essentials) to utilize this functionality.

Here's how:

1. To start, turn on the inventory tracking feature.
2. Once done, go to the Gear icon and select Products & services.
3. Click New, and choose Inventory.
4. Fill out the required details of the item (Name, SKU, Initial quantity on hand, As of date, and Reorder point).
5. Review and select the correct Inventory asset account.
6. Add the other necessary info (Description, Sales price/rate, Income account, and Sales tax).
7. Enter the Cost, Expense account, and Preferred Vendor on the Purchasing information.
8. Hit Save and close.

Once done, we can create a purchase order. Before proceeding, let's turn on the feature:

1. From the Gear icon, select Account and settings.
2. Select the Expenses tab.
3. In the Purchase orders section, select the Edit icon.
4. Turn on the Use purchase orders options.
5. Select Save and then Done.

Here's how to create a PO:

1. Go to + New and then select Purchase order.
2. Choose the vendor.
3. Enter the Purchase Order date.
4. In the Item details section, enter the products you want to purchase.
5. Hit Save and close.

Once your vendor accepts the purchase order, add it to an expense or bill to increase the number of products.

Furthermore, expense accounts track operational costs unrelated to sellable goods, while inventory accounts are assets that track the value of goods purchased for resale. When creating a vendor, only expense accounts are available to ensure accurate bookkeeping and prevent errors in financial records.

Finally, I've added these resources to help you set up reorder points to keep tabs on your items and run reports to see your best sellers, what’s on hand, the cost of goods, and more:

• Set up low stock alerts in QuickBooks Online
• Use reports to see your sales and inventory status

I'm here to help you again if you need additional assistance with the process or creating your sales transactions. Or would you like to learn more about other processes in QuickBooks? I'm with you every step of the way.

thank you very much for This information! Just what I needed. When I initially went into the purchase order the item detail section was not expanded so I did not see how to put the actual inventory item in what you shared is just what I was looking for. Thank you!

I do have another question. All of my sales are online through a processor. I get a feed from my processor with all of my sales by item. Is there a way in QuickBooks online to integrate this to record the sale the increase to cash the decrease in inventory and the charge to cost of sales automatically?

Thank you!

Thank you very much for all the information below! Just what I needed to understand how it was handled!

I do have another question. all of my sales are online through a processor. I get a feed from the processor with my sales by item, Is there a way to integrate this feed from the processor to automatically record the sale in QuickBooks online as well as the reduction of inventory by item and the charge to cost of sales?  If not how is this handled in QuickBooks online?

Thank you for any help you can provide! 

Hi, Jeff. I'm glad to hear that the initial information provided by my colleague was helpful for you!

I'm glad to assist you with your next question regarding sales integration to QuickBooks Online (QBO) through an online processor.

Can I ask for the name of your online sales processor? While many payment processors and e-commerce platforms integrate with QBO to automatically bring in your orders and payouts and update your inventory, I want to ask this so we can provide more accurate guidance on the integration process.

For now, you can consider checking through the QBO's apps page if you can find your online payment processor. Here's how:

1. Go to Apps in your QBO account.
2. Select Find apps.
3. In the search field, type the name of your online sales processor.
4. If you can find the name, check the Overview and Reviews to check if the integration works for your business needs.

For future reference, let me add this article to get helpful insights on the things you buy and sell: Use reports to see your sales and inventory status in QuickBooks Online.

We'll be here in the Community if you have further questions about online payment processors integration with QBO. We'll do our best to assist. Take care!

@jeff-crossman-ve 

Which processor do you use?

We use Authorize.net.  Let me know how to set them up in QuickBooks and what the process is to get the feed in QuickBooks to allow for automatic sales receipt by item sold and reduction of inventory and increased to cost of sales. Thank you very much!

You need an inventory management app as the connector between Authorize.net and QBO.