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AutoKing
Level 1

Used Car Lot Chart of Accounts

My family started a used car lot. I am looking for assistance with posting transactions to the correct chart of accounts for the cars we buy. Each car usually has some repair work that may need to be done to it. I started with the chart of account Car & Truck (an expense account) and created sub-accounts for each piece of inventory we have and post the expenses we accrue to the correct sub-account that details which piece of inventory the expense was for. I am not sure if this is the correct way to handle it and would like some input. I use QB Online and noticed that there are chart of accounts for cost of goods sold and then the expense accounts which I have been using. Can someone give some advice on how to handle this?

1 Comment 1
Rustler
Level 15

Used Car Lot Chart of Accounts

1. what you buy to keep on hand and sell is defined as inventory

 

2. the process
2a. you buy a car, use a cash type bank account account named for the car (all taxes, shipping, etc)
2b. use that same account for any purchases or expenses that are needed to get the car ready to sell
2c. when the car is ready to sell, create the inventory item for the car
2d. buy the inventory item from a dummy vendor and use the cash type bank account named for the car to pay for it
2e. rename the cash type bank account to something that means it is zero balance and can be used for the next purchase
2f. sell the inventory item

 

Inventory items have three accounts
expense = COGS
income = your sales income account
asset = inventory asset

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