I sell used books, and I can't use the "inventory item" feature of Quickbooks, since each individual book is different. I keep details on each item for sale in a separate data base.
Is there a way to add purchases to inventory and deduct sales from inventory without an "item", just a dollar amount? Should I set up some different type of accounts and use JE's somehow?
Any help or suggestions appreciated.
Alice
You want to do periodic inventory: You record all purchases to a COGS/Purchases account and do periodic physical inventory counts. You would do JE to adjust your Purchase/Inventory accounts base on the physical inventory you conduct.
Take a look at this page:
You may also use a generic inventory item like "Book". Add a unique title, author, ISBN, to the purchase entry. Use the same description on a sale. The inventory can be exported from QB to Excel sorted and subtotalled to give you a rough list for inventory.
OK. I understand about the periodic inventory from Laura's response (Thank you Laura!) I do have a low volume, and I know my purchase price on every book sold, so it's not unreasonable for me to keep the inventory updated for every sale, although the interval could be longer (daily, weekly) if my volume increased. The part that is just driving me crazy is how to reconcile Quickbooks with that accounting course I too too many years ago.
According to my text book, Cost of Goods Sold is a calculation: Beginning Inventory + Net purchases + Freight in = Cost of goods available for sale - ending inventory = Cost of Goods Sold
So I'm thinking that I need some account called "Inventory" and my only choices in Quickbooks seem to be "Inventory Parts" and "non-Inventory Parts". I know "Inventory parts" won't work for me, and I can't really see that "non-Inventory Parts" is much better, but it's the only account type available that seems at all reasonable when I try to add an item to the Vendor Payment "check".
I've been reading posts all morning, and here is what I think will work. I would appreciate it if you could give me your thoughts.
Create an item called "Books" as a "non-Inventory Part." Check the "This item is used in assemblies or is purchased for a specific customer job" checkbox. This will enable me to associate two accounts with it.
On the "Purchase Information" side, leave the cost blank and make the expense account "Cost of Goods Sold". On the "Sales Information" side, leave the sales price blank and the income account "Merchandise Sales."
When I use this to enter purchases and sales, both are updated, but now I'm stuck. I think I need a JE to credit Cost of Goods Sold and Debit...what?...I still don't seem to have an inventory account anywhere.
Arggggggg! Am I on the right track or totally lost?
Alice....
Yup, that's correct. If set up correctly, QB will automatically adjust Inventory and COGS as you buy and sell your books.
If you want to use QB's inventory you want to use "Inventory part". First go into Preferences and enable Inventory under Items and Inventory. Set up your Inventory G/L account. When you create the Item just specify the Inventory, COGS and Income accounts per your CoA.
When you purchase items QB Debits Inventory/Credits A/P or Cash.
When you sell an item, QB posts the foolowing transactions:
Debit COGS/Credit Inventory (cost) Debit A/R (or cash)/Credit Income (sale price)
This 2 part entry eliminates the need for any JE to COGS or Inventory at year end.
Laura:
Thanks for the additional information, but how do I deal with the fact that each and every item I have is totally unique? I don't see how anything can be updated automatically if I can't tell QB exactly what my COGS is on any individual item, and I can't do that without entering each individual book as an inventory item. Since QB has a limitation on # of items (11,400 I think), this is not a viable solution. (Unless I'm missing something.)
Isn't there some way for me to establish an Inventory account that QB doesn't try to update automatically for me?
This is driving me totally nuts. I know this is a good program...everything else about it seems to be perfect for me. It's just the inventory part that isn't making any sense. The QB help file says it's not appropriate to use QB for inventory management for things like antiques, and my situation is just like that. The problem is, QB doesn't seem to give any information on how to proceed if QB doesn't handle inventory management for you. There still needs to be an account for Inventory. I just don't know how to make one.
I hate to seem dense, but I just don't get it.
Alice
The G/L account is Inventory and the ITEMS are Inventory Parts and Non-Inventory Parts. You need to be using both G/L accounts and Items.
You may want to create several Items for each type of book. They are Non-inventory parts since you've decided that you don't want an item for each different type of book. Create as many Items as you feel necessary to track at. This could be by type of book: mystery, drama, etc or even new vs used.
Don't check the box "this item is used..." since you are not charging the purchase directly to a customer or using assemblies. The account to specify in this case is the COGS account. This will track your Purchases in the equation above.
This choice of boxes will disappear when you uncheck the box.
Yes, purchases/COGs and sales/Income accounts are automatically updated as you buy and sell the books. At the end of the accounting period you will need to do a manual physical inventory to get your "Net inventory" in the above equation. Plug the info into the equation and you have your correct COGS amount for the period. Post a JE that adjusts the inventory and COGS accounts so that the equation is completed. Your accounting book should show you the proper JE that needs to be booked at the end of the accounting period.
You are on the right track BUT I think you are looking to have QB do it for you automatically. With perpetual inventory method (Items=inventory parts) that works. But you are using the periodic method and QB does not do it for you since it has no way of calculating the ending inventory. You aren't specifying individual inventory purchase with their respective costs, etc. You have to do a JE to get the correct ending COGS and Ending Inventory amounts on your books.
Bookstores (and other numerous-item businesses - grocery, auto parts, etc.) seldom use individual COGS. Instead, they use the "Retail Method" for determining COGS.
The RM allows you to pretend that the COGS for a specific item is the average of your entire inventory. For example, if you have $10,000 at retail on the shelf and all that stuff cost you $5000, you are allowed to assume the COGS of an individual item is 50% of its selling price.
So, if you sell an item for $20.00, you record a COGS of $10.00, irrespective of what the twenty dollar item actually cost.
Even if you use the individual cost for each item sold in determining COGS, you'll face the issue of multiple identical items (say books), all selling for the same price, but that have different individual costs.
Assume, today, you have $10,000 worth of merchandise for which you paid $5,000. For the rest of the month, record sales. Assume sales to be $3,000. Further, assume you paid $6,000 for another $15,000 worth of inventory. At the end of December, you'll make the following adjustments.
Sales Debit COGS - $1,500 (50% of the $3,000) Credit Inventory - $1,500
Purchases Credit inventory - $6,000 Debit Accts Payable - $6,000
Outside QB: Inventory at retail: (10,000 + 15,000 - 3,000) = 22,000
Laura! I think you've given me the missing piece!
This is the part I wasn't getting. I kept on thinking that I had to make or find an account called "inventory", but I wasn't looking in the G/L for it.
Thank you so much for sticking with me on this! I think I finally understand it now! And I'm off to enter a whole bunch of purchases and sales....
Alice
Isn't the RM used when someone is purchasing multiple copies of the same book and each item is a different book in the inventory? I think my-wings may have single copies of lots of books making this method impractical as well as very inaccurate?
The RM method is accurate, but not precise. In the era before computers, it was a logistical nightmare to keep up with 10,000 line items in your average bookstore or 25,000 line items (SKUs) in your average grocery. An auto parts store may stock 20,000 different items and even a modest liquor store will have 8-10,000 different kinds of booze.
In the RM, it makes no difference what an individual item costs, you deal only with the aggregate average.
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