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Level 1

What is the proper way invoice for non inventory items and have COGS show up on reports?

I run a small computer repair shop.  I'm coming from an old and long unsupported Microsoft Office Accounting to QuickBooks Pro 2016 and I'm struggling to figure out some basic invoicing tasks. Doing PC repair I often purchase non inventory parts for repairs and I can't figure out how to get this to show up correctly when running a report--- Say I create a new item, a non inventory part I check box for "this item used in assemblies or purchased for a specific customer" I enter the cost I paid for the part and enter it under the "Purchases-Hardware for resale -Cost of Goods Sold" expense account Then I enter the Sale price and enter that under the "Sales - Hardware" Income account. However when I then run a Profit and Loss report it shows the full sales price of the item as all income without any breakdown of the actual cost of goods sold. So say I make an invoice for $60 of labor and a part that cost me $30 for which I charge the customer $45. When I run a profit and loss report I would expect to see a line for Cost of Goods sold reporting the $30 I paid for the part and reflecting my $75 profit on the job. Instead it reports the full $45 under Sales Hardware as though that is all profit with no way to show the cost that I paid for the part. I figured maybe I have to first create a P.O. for the part and then apply it to the invoice but that didn't seem to work either. Also I'd be curious how people write up an invoice for a flat rate repair in quickbooks, something like a screen replacement, something for which the part price may change incrementally, but for which I charge a standard flat rate fee.  When I invoice the customer for these flat rate repairs I don't want to have a breakdown of parts and labor on the invoice. Thanks!


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Best answer 12-10-2018

Accepted Solutions
Level 15

Cost on the item screen is for reference only.  You have...

Cost on the item screen is for reference only.  You have to actually use that item on a purchase and enter the purchase amount for the cost of the item to post to your accounting

PO's, estimates are non posting, they are basically memos of what is ordered or promised

flat rate items, I prefer to use other charge type items, set the amount in the rate block.  You can do it flat rate for one hour, and if something takes longer, just increase the qty to 1.5 hours or something on the invoice or sales receipt

What you put on the customer invoice is up to you, but if you carry inventory you can not show it being used easily without putting it on a sales form, you can "sell" inventory for a zero dollar amount and still have the correct accounting for qty on hand and cost.  The flat rate item would indicate the sale price in this case

Personally I would put each item on the customer sales receipt with a zero dollar sales price, so that there is record of what exactly I worked on in case the end item comes back to you, and for work warranty issues.

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10 Comments
Level 15

Cost on the item screen is for reference only.  You have...

Cost on the item screen is for reference only.  You have to actually use that item on a purchase and enter the purchase amount for the cost of the item to post to your accounting

PO's, estimates are non posting, they are basically memos of what is ordered or promised

flat rate items, I prefer to use other charge type items, set the amount in the rate block.  You can do it flat rate for one hour, and if something takes longer, just increase the qty to 1.5 hours or something on the invoice or sales receipt

What you put on the customer invoice is up to you, but if you carry inventory you can not show it being used easily without putting it on a sales form, you can "sell" inventory for a zero dollar amount and still have the correct accounting for qty on hand and cost.  The flat rate item would indicate the sale price in this case

Personally I would put each item on the customer sales receipt with a zero dollar sales price, so that there is record of what exactly I worked on in case the end item comes back to you, and for work warranty issues.

View solution in original post

Level 1

Thank you. That is helpful. COGS now shows up on the P&L...

Thank you. That is helpful. COGS now shows up on the P&L but values seems to be reversed.  Here's the scenario - I create a new non-inventory item for a generic part, say a laptop screen, I do not check the box for "this item used in assemblies or purchased for a specific customer" and I leave the price empty since it will vary from screen to screen and I assign it to the Purchases - Hardware for Resale - Cost of Goods Sold account.  Then I go to Vendors, Enter Bill, and I purchase the item for $35.46.  I then create an invoice, charging $60 labor and add the item to the invoice, charging the customer $45 for the item.  Then I receive payment for the invoice and run a P&L.  My P&L now shows consulting income of $60, and reports COGS under the category "Purchases - Hardware for Resale" where it reports a Bill in the amount of $35.46 applied to Accounts Payable and an Invoice for the item under Accounts Receivable for -$45.  This results in it reporting Total Purchases - Hardware for Resale as -$9.54 and Total COGS as -$9.45.  Oddly it still reports gross profit correctly as $69.54.  Then I purchase another screen using the same item and enter a bill for it for the cost of $69.99 and then apply it to a new Invoice, charging $60 labor and billing the customer $99.99 for the part, and receive payment for this invoice.  It now reports Total COGS as -$39.54 and gross profit as $159.54  Again, gross profit is actually correct but unless I'm misunderstanding how COGS works shouldn't the COGS value be $105.45, my actual cost for the two parts, with $39.54 being my profit from what I have sold?
Level 15

you are confusing things in  the P&L - for accrual income...

you are confusing things in  the P&L - for accrual
income shows 60 and cogs shows 35.46 and the bottom line is net profit
the a/p entry you are looking at in the detail of the cogs entry is the source of the expense, the bill.  Had you written a check from your bank, it would say check, or credit card if that is how you paid for it.

a/p, your company debit is shown on the balance sheet

if you change the P&L basis to cash reporting, there will not be a COGS entry since the bill has not been paid.  And if the invoice is not paid, there will be no income either.
Level 15

You set up and use Two Sided Items, per my attached scree...

You set up and use Two Sided Items, per my attached screenshot.

This is how you Buy that item, mark it billable, and charge it to the customer usign Add Time & Costs.

Or just Job Track the Purchase.

Now you have COGS; that is the left side account link.

Level 1

Ah, that's the ticket.  OK, so if I create a so called Tw...

Ah, that's the ticket.  OK, so if I create a so called Two Sided item, everything now shows up correctly on the P&L.  I guess I can just enter all non-inventory items that fall under COGS this way.  I suppose non inventory items that are not two sided would only work for expenses, say purchase of office supplies for the business?
Level 15

"I guess I can just enter all non-inventory items that fa...

"I guess I can just enter all non-inventory items that fall under COGS this way.  I suppose non inventory items that are not two sided would only work for expenses, say purchase of office supplies for the business?"

ITEMS are what you make, do, sell, charge, buy, or Buy and Sell. They flow data to accounts, or in and out of them.

They are linked to Income, Expense, Liability, Asset, or Bank. ANY account. Service, Noninventory and Other Charge Types can be Two Sided, because you want to control the separation of the use of the items on Purchase Transactions from the use of the items on Sales transactions.

You use Items for Customer Name related tracking purposes.

Service Type items are the only item that shows on Timesheets, for use there.

For instance, I buy Office Supplies for Myself AND a client:

Supplies as Noninventory item; expense side is my Office Supplies expense account. Revenue side is Reimbursed Costs income account.

Expenses tab = my office supplies, posting to my Account, directly. No item used here.

Click on...

Items tab = list Customer Purchases and Job Track (assign names). Mark them Billable, or NOT, if not to be charged to the customer.

Total of check = Both Tabs.

Now my Expense account has ALL of this, but Item reports and Job report show only the Customer Activities. My Income account has the charged-back costs, for Reimbursed as income.

Please see my screenshot, attached. Notice the Exact Match for the data.

"Here's the scenario - I create a new non-inventory item for a generic part, say a laptop screen,"

Perfect; put details in the description. Don't micro-manage Items for various sizes of Hard-drives, for example.

"I do not check the box for "this item used in assemblies or purchased for a specific customer" "

But you DID buy it as needed, for a specific customer. It is not generic Stock on hand.

"and I leave the price empty since it will vary from screen to screen"

Help tells you if Cost varies, leave it as 0. Leave Price at 0, and a two sided item will pass across cost at cost, for Billable entries.

"and I assign it to the Purchases - Hardware for Resale - Cost of Goods Sold account.  Then I go to Vendors, Enter Bill, and I purchase the item for $35.46."

Sure, if you have not yet paid for it.

"I then create an invoice, charging $60 labor and add the item to the invoice,"

On the Bill, put the customer name and mark it BILLABLE. Then, use the Add Time & Costs icon = here is that entry from the bill.

The point is, this is a relational database. Put in the data once, and make it available to all of the other functions. Do not manually enter on a Bill AND manually enter on the invoice. Too much manual entry. And, by using Billable status, you won't overlook charging out something you incurred.

"charging the customer $45 for the item."

Oh, you DO want a markup, then?

"Then I receive payment for the invoice"

OMG, you are doing So Much Extra work, and so many extra steps...You use Invoice because you have not yet been paid. The Payment is at a later date = two steps. Otherwise, you use Sales Receipt = One Step = date of sale IS date of payment.

"and run a P&L.  My P&L now shows consulting income of $60, and reports COGS under the category "Purchases - Hardware for Resale" where it reports a Bill in the amount of $35.46 applied to Accounts Payable and an Invoice for the item under Accounts Receivable for -$45.  This results in it reporting Total Purchases - Hardware for Resale as -$9.54 and Total COGS as -$9.45."

Yes, that is called Netting In The Accounts and is a set up error reflecting an Item was used for Both Purchase and Sales purposes. You FIX the item and QB offers to Separate the data for you. Let it Split that data for you.

"but unless I'm misunderstanding how COGS works shouldn't the COGS value be $105.45, my actual cost for the two parts, with $39.54 being my profit from what I have sold?"

You want to see GROSS as Income, and Gross as Expense = All data is tracked as Gross.

Fix the items.

And try not to use so many steps.

For instance, Enter Bill is NOT needed, if you already Paid by Credit Card. Go directly to Enter Credit Card Charge.

GTO
Level 1

Re: What is the proper way invoice for non inventory items and have COGS show up on reports? Similarly, we have a body shop with no inventory. Unfortunately, when we invoice a customer, the parts purchased are being credited to the Parts Purchase expense account from Accounts Receivable? Help

Similarly, we have a body shop with no inventory. Unfortunately, when we invoice a customer, the parts purchased for the specific job, are being credited to the Parts Purchase expense account from Accounts Receivable and reducing the parts expense?


 

QuickBooks Team

Re: What is the proper way invoice for non inventory items and have COGS show up on reports? Simi...

Hi there, GTO.

 

Thank you for joining this thread. I can help you properly set up non-inventory items to show under COGS and so they are not credited to the Parts Purchase expense.

 

The posting account of the item on an invoice depends on its setup. If you wish to change the accounts, here's how:

  1. Click Lists.
  2. Choose Item List.
  3. Look for the non-inventory item and double-click it.
  4. Put a check mark on the This item is used in assemblies or is purchased for a specific customer:job box.
  5. Update the accounts fields.
  6. Click OK to save changes.

 

That should help you correct the setup of your items, GTO. For more information about items, you can use this link as a reference: Add, edit, and delete items.

 

I'm still here to help you more if you have other questions about items. Just drop a comment or mention my name. Have a wonderful day!

Level 1

Re: What is the proper way invoice for non inventory items and have COGS show up on reports? Simi...

Quickbook Team. We have a similar issue as to compared to the bodyshop with not keeping inventory but do have job specific product purchases. The screen you have shown is nowhere in our system. I assume that is a QB Desktop program. Would you be able to give more details as to how this can be done in QBOnline?

QuickBooks Team

Re: What is the proper way invoice for non inventory items and have COGS show up on reports? Simi...

Thanks for joining this thread, MDSonline.

 

I can provide the steps for changing the posting account attached to the items for the QuickBooks Online (QBO) version.

  1. Click the Sales menu.
  2. Choose Products and Services.
  3. Look for the item.
  4. Click the Edit link under the Action column.
  5. Update the posting accounts of the item.
  6. Click Save and close.

1.PNG 2.PNG

For in-depth information, you can use these links as a reference: 

That should keep you going today, MDSonline. I'm still here to help you more about products and services. Just add a comment below. Wishing you all the best!

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