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Level 1

Cost of Goods Sold Showing as Accounts Receivable (A?R)

When we created our first part we labelled it "Custom Part" as we were not sure of the exact things we would be selling right away and have been using it for the month we have been running the business. Upon recently sitting down with a more experienced bookkeeper than myself (and consulting another over the phone) it has been brought to my attention that Cost of Goods Sold was an A/R account and should not be. I currently have it set up as an Inventory affecting part so when I recreated a similar part under non-inventory affecting I was able to choose "purchases" as the Expense account and I left "Sales of Product Income" as the Income account. I am trying ti understand why and A/R account would be showing as an expense account? It has been messing around with our profit/loss margins showing a significantly negative amount which we have not come anywhere close to? Has anyone else come across this issue.




1 Comment 1
QuickBooks Team

Cost of Goods Sold Showing as Accounts Receivable (A?R)

Hello OGET,


Consulting other bookkeepers is a great idea when you want to double check the work you've done or when you're not sure the steps to take to set up items the way you need them to be. I appreciate the amount of detail you've provided here and will point you in the right direction for getting back on track.


The details you've given are great, and with being able to see how you've set up your account, it'll help to see the exact setup of your items and accounts chosen to help smooth this over. If the other bookkeepers you were speaking with are familiar with QuickBooks Online, it may even be beneficial to work with them.


When you set up an inventory item in QuickBooks Online, the accounts you can choose from are limited, and the Purchasing information section in particular defaults to COGS for an Expense account. When you set up a non-inventory or service item, there's a bit more freedom in choosing the account types, so depending on what you've chosen for the item, that could be why the option to use an A/R account with the purchasing information was available. This is why I'd like for someone to take a closer look at this with you.


I'll provide you with a few links about inventory tracking, COGS, and how QuickBooks handles these things so you can familiarize yourself with the system, but feel free to get in touch with our support team using one of the methods I'll list at the end of this response. First, here are the articles.

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