1 Practical QuickBooks: Items, Products and Services Tracking what you sell to Customers And buy from Vendors By Alicia Katz Pollock Royalwise Solutions Portland, OR
2 2 Standard Legal Notices Copyright Presentation and workbook 2015 by Royalwise Solutions. All rights reserved. Printed in the United States of America. No part of this book may be used or reproduced in any form or by any means without prior written permission of Royalwise Solutions. Material remains the property of Royalwise Solutions. Disclaimer This training material is presented without warranty of any kind, either express or implied respecting the contents of this book, including but not limited to implied warranties for the book s quality, performance, merchantability, or fitness for any particular purpose. Trademark Acknowledgments All product names and services mentioned in this workbook are trademarks or registered trademarks of their respective companies. Royalwise Solutions is not affiliated with any of these companies.
3 3 Table of Contents Understanding Items... 4 Should you use an Item or an Account?... 4 Types of Items... 5 The 11 Item types:... 5 Use the Following Items when Recording Sales:... 5 Use the Following Items to Calculate:... 5 Creating New Services... 6 Non-Inventory Items... 8 Inventory Items... 9 Sales Tax Groups Inventory Assemblies Inventory Management Helpful Inventory Hints: What is Inventory? Purchase Orders Receive Items Receive Items and Enter Bill Selling to Customers Creating Invoices Sales Orders Inventory Reports Adjust Inventory... 41
4 4 Understanding Items Items are the products and/or services you sell. When you first set up your QuickBooks, it s very important to develop an organized, comprehensive set of items, for two reasons. First, these are the entries that will show up on your Invoices, Sales Receipts, and Purchase Orders. Second, when you run reports on your sales, you will be able to determine which of your products and services are the most popular, and which have the best margin (which isn t necessarily the same thing!). Should you use an Item or an Account? Some people get confused as to whether to create this level of detail in the Chart of Accounts as Income categories, or whether to create the details in the Products and Services list. Think of a restaurant. Their Chart of Accounts would have Income categories for Food, Beverages, and Alcohol because you would want to see those broken out on a P&L report. The Products and Services list would have Appetizers, Entrees, Desserts, and Beverages. Further Subcategories might be created for every dish on the menu if the owner wanted to track exactly what sold to what customer! (Note: in a real restaurant file, this level of detail would be in the restaurant s POS system, not necessarily in their QuickBooks file, but it s a good analogy). When you create an Item, you link it to Income and Expense Accounts. When the Item is used in QB, it automatically posts an entry to that Account and another to the appropriate Accounts Receivable, Accounts Payable, Checking, or other Account.
5 5 Types of Items When you set up your Items, you ll assign a unique Item Name or Number and specify which Account it affects in your P&L report. All Items are listed in Lists > Items. In QBO, go to the Gear and choose Products and Services. The 11 Item types: Use the Following Items when Recording Sales: Service Inventory Part Non-inventory Part Other Charges Group Use the Following Items to Calculate: Subtotal Discount Payment Sales Tax Sales Tax Group Note: QBO only has two types, Services and Products. Products are noninventory by default, but you can turn on Inventory inside each item. SERVICE: Labor or Consulting that is charged to a Customer or purchased from a Vendor. Services can be charged by the Job or by the hour. INVENTORY PART: Parts purchased, tracked as Inventory, then resold.
6 6 NON-INVENTORY PART: Parts purchased, but not kept on hand as Inventory. These Parts can be part of your overhead (such as office supplies) or they can be materials bought to finish a Job and then charged back to a Customer. OTHER CHARGE ITEMS: Used for miscellaneous charges such as shipping, delivery charges, and setup fees that appear on Invoices. SUBTOTAL: Calculates Item Types that appear before it on an Invoice or Bill. GROUP: Allows you to enter one Line Item that brings up several products all at once. DISCOUNT: An amount subtracted from the Invoice Total. PAYMENT: Reduces the amount owed on an Invoice. SALES TAX ITEM: Calculates a Single Tax. SALES TAX GROUP: Calculates two or more Sales Taxes applied to the same sale. INVENTORY ASSEMBLY: This is an additional Item for Premier and Enterprise users. Assembly Items are objects built from your Inventory parts that you want to track, report on, and resell as single units. An example might be a computer that is made up of a CPU, monitor, keyboard, and mouse. Although you need Premier or Enterprise to create and build Inventory Assemblies, any version of QuickBooks can view, sell, and report on existing Assembly Items. Creating New Services While looking at the items list, in QBDT find the + button at the bottom, or in QBO click the New button in the upper right. Give the Service item a unique name. This is the code you'll enter on Sales Forms. In this sample, call it Installation. Because this is a Service, you don t need to track inventory or purchase anything, so the only thing to check is I sell this to my customers.
7 7 In the Description field, enter what you want it to say on your Invoices and Sales Receipts. Type the most common thing you would enter, so that you don t need to type it every time. You can change it on each transaction to add detail. In the Rate field enter the service's price. If you don t have a specific (or frequently used) price, you can also leave this blank to type it every time. Assign the Service to an Income Account to track which of your general offerings this falls under. Select Is Taxable if you will charge sales tax for this item. Note that if you wanted to create subcategories with groups of related services, you could make additional items, and check off Subitem of, then select an account to use as a heading. If this service is subcontracted out someone else who performs the work and then bills you, also check off "I purchase this product/service from a vendor." Enter in the price they charge you, and the Expense Account is most likely Subcontractors - COS (Cost of Goods Sold). Now let s add a Subitem to track work by a Subcontractor. Create a new Service item, as before. This time, the Item Name will be Rock Fountain. Check Subitem, and choose Installation on the submenu. Also check off This service is performed by a subcontractor, owner, or partner. If you know the subcontractor s standard rate, enter it here so that it automatically fills in when I create a PO or an Estimate. If there is no standard rate, or a frequently-used rate, you can leave it blank. Next, enter the price you charge the Customer for that service
8 8 The Expense Account is your Subcontractors COGS. The Income Account is the income account you use for that service. You may choose to use Subcontractors Income, or just group it with your own service income account on your Chart of Accounts. Non-Inventory Items The next Item will be Non-Inventory. We will enter an Item called Appliance using the same clicks. Select: Items & Services Item (tab) New. The Type is Non-Inventory. Use this Type when you buy but do not track goods, such as office supplies or materials for a specific Job that you charge back to the Customer. When you create an Item, you link it to an Account; when the Item is used on a Form, it posts an entry to that Expense Account and another to the appropriate A/R, A/P, Checking, or other Account. Again, we entered an Expense Account: Job Materials COGS Appliances and an Income Account: Job Materials Income Appliances. We also entered a Preferred Vendor. With all this data entered into my QuickBooks, I can begin to establish patterns in my work. Most Jobs are billed the same, and Subs and Vendors are the same. I can focus on only those issues that directly deal with the Customer and are atypical in our relationship.
9 9 Inventory Items Use Inventory Items to track merchandise that your business purchases, keeps in stock as inventory, and then resells. Inventory Parts track your quantity on hand. When you purchase items using a PO, a Bill, a Check, or a Credit Card Expense, it adds that value to your Inventory Asset account in your Chart of Accounts and Balance Sheet. When that item sells, QB moves the value from Inventory Asset to Cost of Goods Sold automatically. QBDT has a Reorder Point that wil alert you when it's time to reorder merchandise, but at this time QBO does not have that feature. Select Inventory Part from the drop-down menu. Enter: Light Pine as the Item Name. Checkmark: Subitem of. Select: Cabinets (drop-down menu). Enter: the Description as it will appear on Purchase Transactions. Press the TAB key, and the information will populate the Sales Information Description. Under Cost, Enter: and under Sales Price Enter: Select: Job Materials COGS Account (drop-down menu). This Account tracks the cost to you of the Items you have sold. Select: Income Account (drop-down menu). This Account tracks the income from the resale of the Inventory Item.
10 10 The Asset Account is Inventory Asset. This Account tracks the current value of your inventory. It is automatically created for you when you set up the first Inventory Item. The Reorder Point for this Inventory Asset is set at 15. Select: Next. This Inventory Asset account tracks the total value sitting in your warehouse. Sales Tax In QBDT, you must create a separate Sales Tax Item for each Tax that you report. The Default Sales Tax Item is set up through your EasyStep Interview. In QBO, the Sales Tax center allows you to calculate the Sales Tax at the bottom of a transaction instead. Select: Sales Tax Item from the drop-down menu for Item Type. Enter: the Tax Name Natrona and the Description Sales Tax in the respective fields. Enter: the Tax Rate 5% in the Tax Rate % field. Enter: the Tax Agency Natrona County. Select: OK.
11 11 Even though a combination of Sales Taxes are collected and reported separately, it s best to combine taxes on Invoices and Sales Receipts. QuickBooks allows Tax Items to be grouped so that Customers see a single tax amount on Invoices and Cash Sales Receipts. The Name of this Sales Tax Group is San Thomas Group. Select: Sales Tax Group from the drop-down menu under Item Type. The New Item window changes. Enter: Group Name/Number. Enter: Description from drop-down menu in Tax Item column. Select: the first Tax Item County, San Thomas 6.5% to use in the Group. Select: the second Tax Item Assessment 1.75% to use in the Group. The Rate, Tax Agency, and Description fields automatically fill in. The Group Rate is now 8.25%.
12 12 Groups Now that you ve seen how an Item Group is made, let s make one for Items that you make a profit on (rather than just pay back out to a taxing agency). Often, grouping our services and work for fixed Jobs can make life simpler and cut down on EBOK (Error Between Operator and Keyboard.) We ll use construction as our example. Our Company has a standard labor install price and product price for Vinyl Tile. They want to bid at a flat rate, so they group these two Items. Each of these can be individual charges or, if you re doing the same Job in the same area over and over, you can group them for easier data entry and to make sure you don t miss any Items in your Job Costing.
13 13 Here I enter an Estimate for a new Vinyl Floor. If I do Vinyl Floors often, I can memorize this Estimate to use over and over. I have added in my Markup. Select: Customer Navigator Estimates. Enter: Customer Name and Job. Select: Group Item Vinyl Tile 12 x 12. All associated Items pre-populate the Estimate. Enter: Costs plus Markup. Another click on Create Invoice (upper right of Estimate) and I quickly change from a non-posting Estimate to a posted Invoice in my A/R journal for this Customer. Markup is included, but the Customer doesn t see the Markup detail, only the details of the work done. Inventory Assemblies We ve mentioned all ten of the standard Items in QuickBooks Pro. Now let s briefly touch on the eleventh Item included in the Premier and Enterprise versions: Inventory Assemblies. First step: Enter the Inventory Parts that will make up your assembled (Built) product. Below we ve entered the parts for a garden irrigation system. Our Company can sell the irrigation system (assembled with sprinkler heads, sprinkler pipes, and irrigation hoses) or it can sell all the parts individually. Like Group Items, we ll put all the parts together under Assemblies and build the irrigation system..
14 14 Unlike Group Items, every Type in an Inventory Assembly must be an Inventory Part. (As with Groups, we added a Service Item and a Non- Inventory Part Item to the Vinyl Tile Installation Item). I have three Inventory Parts set up for the Garden Irrigation System; if we also sold other irrigation systems, some of these parts could be associated with those, too. Second step: Create the Inventory Part for the Built product. Select: Item New Inventory Assembly. (The options are very similar to those for Group Items.) Now we ll enter a New Item for the Garden Irrigation s sale price: the total sum of all irrigation parts. Under Bill of Materials, Select: the available Associated Inventory Parts (drop-down menu). Enter: the Quantity of each Item needed to build the assembled product. Speak to your QuickBooks Professional Advisor about which Account to link this Asset to; you may want to have it in a separate Asset Account.
15 15 Third step: Build the Assembly Product. Select: Vendor Navigator Build Assemblies. In Assembly Item, choose Garden Irrigation System
16 16 Enter: Quantity to Build. This will compute the quantity of each item needed. You also may enter information in the Memo field. Select: Build & Close. Return to your Item List and you ll see that we now have one Garden Irrigation System in stock, and our individual parts have all been adjusted for the amount used to build the irrigation system. Custom Fields QuickBooks Desktop allows you to add custom fields to Vendor, Customer, Employee, and Item Lists. This allows you to tailor QuickBooks to your specific needs. Note: this feature is not available in QBO. In this demonstration we ll add a custom field to Items. We re going to track the Color of the cabinets we sell. Since color or stain is important to our Customer, we want to make sure that we order the correct Items and then
17 17 install them to the Customer s specifications. To Add Custom Fields for Items, you must be in single-user mode. From the Item List, Highlight: Cabinets & Vanities. Select: Item (bottom left corner) Edit. The Edit Item window opens. Select: Custom Fields (top on right of screen).
18 18 Now we fill in the name of the Custom field. Now this information can appear on the PO, Invoice, or Sales Receipt. Creating a field for tracking Color will be worthless unless we use it to link information. So now we need to have the Color appear on the Invoice or Sales Receipt to the Customer and on the PO to the Vendor if we buy them stained or painted. For sake of time we ll just customize an Invoice, but the same procedure is used in other QuickBooks Forms. As with anything, always back up your work. We re going to change a predesigned Invoice Template in QuickBooks, and we ll create a DUP (Intuit Product Invoice) template to work from so we can change everything we need to. Select: Lists (menu bar) Templates (tab) Duplicate. When you re asked What type of form? Select: Invoice and BAM! Now we ll work on the DUP to make our changes. Select: Customer Navigator Invoice (icon). QuickBooks has some built-in questions to assist you with using the proper Invoice for your Company. Speak with your QuickBooks Professional Advisor for more detailed assistance.
19 19 We re going to use the Product Invoice and we re going to change the look of the DUP (Copy of: Intuit Product Invoice). Open: Double Click on Copy of: Intuit Product Invoice Highlight: the appropriate Invoice and Select: Edit. Now we ll add columns to our Invoice to show the Color selection. We want the Color to appear onscreen and on the Customer s printed copy, so we ll add the Custom Field for Color option to the Invoice. Select: Additional Customization (bottom tab) Select: Columns (tab). In the row for COLOR, Checkmark: Screen Print. Note the Order Number. Select: Layout Designer (bottom button) to see how your Invoice will look.
20 20 The layout shows that Color is on our Invoice, but it appears after Price Each and before Amount. We want it to appear before Price Each, so close this view and go back to the Columns tab.
21 21 Enter: 5 for Price Each and 4 for COLOR. Check your layout again and BAM once more! To rename this Invoice Garden Ck Product we will select Manage
22 22 Templates Select Copy of Intuit Product Invoice Template Name Change the name
23 23 Select: Reports Sales Sales By Item Summary. Checkmark: Item Profitability- Lists (menu bar) Item List. From Item List window, Select: Reports (bottom tab) Report on All Items Project Item Profitability.
25 25 Inventory Management Inventory Management is one of the most important processes in any business with inventory. Inventory is often a large asset in small businesses that can easily disappear. So why do so many businesses do such a poor job at keeping track of their inventory? Inventory affects all the main financial reports for a business: The balance sheet, income statement and statement of cash flows are wrong if inventory is wrong! Successful businesses manage inventory to produce good financial information for the business manager. The steps to inventory management are: 1. Track inventory on hand, 2. Record all new purchases as inventory and expense all sales, 3. Count inventory regularly. For some businesses it is weekly, but most would be monthly or quarterly. This process is called cycle counting, 4. Use Quickbooks inventory system to investigate discrepancies and search for inventory errors. Helpful Inventory Hints: 1. Assign some inventory to each employee to count during cycle counts. Cycle count during slow periods when employees have slack time if possible. 2. Recognize inventory management as a critical function of the business. Teach employees of the importance of accurate cycle counts. This will help them become inventory minded. 3. Count some inventory every day, week or month. This makes the task smaller than counting all the inventory at one time. 4. When inventory counts reveal discrepancies, work with employees to create better procedures to insure no inventory enters or leaves the business without being entered in the system. What is Inventory? Businesses that purchase items ready for resale keep an Inventory of items on hand or build inventory assemblies. Inventory features are enabled to track the quantity and value of the Inventory. QuickBooks Desktop uses the average cost method to determine the value of the Inventory. QBO uses FIFO (First In, First Out). The EasyStep Interview gives you the option to enable the Inventory function.
26 26 If you elected not to enable it at that time, you can do it manually through the Company Preferences. From the Main menu, Select: Edit Preferences. From the left scroll, Select: Items & Inventory Company Preferences (tab). If you re unsure about using the Inventory feature in your QuickBooks, then create Non- Inventory Items. This allows you to carry Items for placement on an Invoice or Sales Receipt. You can always change a Non- Inventory Item to an Inventory Item at a later date. Consult your QuickBooks Professional Advisor for help with this decision. There are varying capabilities of inventory management based on the version of QuickBooks used. Below is a list of inventory capabilities by version type. Requires QuickBooks Pro or higher edition: Track job costing Track inventory (average cost only) Requires QuickBooks Enterprise with Advanced Inventory: Track inventory in multiple locations Serial Number or Lot Tracking Bin Location Tracking Barcode Scanning FIFO Inventory Costing Requires QuickBooks Premier or higher edition: Build inventory assemblies Create and track sales orders and backorders
27 27 Track current availability and not just quantity on hand Use price levels based on per item prices Create sales orders or purchase orders from estimates Create Bill of Materials for inventory assemblies Billing rate levels In order to track and sell Inventory Items, they must be in the Item List. In this demonstration, we ll track the 1 2 Line Item, which is a Subitem of Irrigation Hose. Select: Lists Item List (menu bar). The Item List opens. Highlight: 1 2 Line (item) and double-click. The Item Irrigation Hose: 1 2 Line opens in Edit view. The Edit Item window has all the data about the Item. Enter: the Preferred Vendor (from drop-down menu) as a helpful reference when you need to order more Items. The Reorder Point has been set at 1,500. There are 17,833 Irrigation Hoses On Hand and 0 On Sales Order. The cost is $0.12 and the sale price is $0.15. The Income Account is Job Materials: Misc Materials and the COGS Account is Cost of Goods Sold. QuickBooks creates the Asset Account Inventory Asset in your Chart
28 28 of Accounts when you enter your first Inventory Item. This Account tracks the value of your Inventory On Hand. Next, we ll order 1, Line Irrigation Hoses from the Preferred Vendor. To order Inventory Items, we use a Purchase Order. Purchase Orders From Vendors (menu bar) Select: Create Purchase Orders. You can also create a purchase order from New Transactions in the Vendor Center. The Create Purchase Orders Form opens. Use this window to enter the products you wish to order and the quantities needed. As you fill in this information, QuickBooks calculates the Purchase Order number, Item Cost, and Total Cost. PO s, like all other QuickBooks forms, are customizable and can be printed and ed. The Preferred Vendor ( Conner Garden Supplies ) automatically populates the Vendor field when I enter the items to order. (I can choose another Vendor at any time.) The Company information will appear automatically. If I needed these Cabinets to go directly to a Job, I could select the specific
29 29 Customer: Job in the Ship To field and the Ship To Address would change from my store location to the jobsite. If you have Classes set-up, you can select the appropriate Class from the Class field. 1 2 Vinyl Irrigation Line filled in across the PO. The Description and Rate fields fill in automatically. Enter: 1,000 under Qty (the quantity to order). Select: Save & Close to record the Purchase Order. After you create your first Purchase Order, QuickBooks adds a non-posting Account called Purchase Orders to your Chart of Accounts. This non-posting Account does not affect the Balance Sheet or Income Statement; it s available so you can produce a Report that shows all Purchase Orders created. Let s take a look at the Item window after the Purchase Order has been recorded. Quantity On Hand is still 17,833, but Quantity On P.O. now shows 1,000. Next, we ll look at the Purchase Order List. From Vendor Center, Click on the Transactions (tab) and Click Purchase Orders from the list. To get more detail, on all purchase orders Click on the Run Reports (button) and Select View as Report. Now we will run the Open Purchase Orders Report by Select: Reports Purchases Open Purchase Orders.
30 30 The Open Purchase Orders Report opens. This Report shows all open Purchase Orders, including Vendor, Purchase Order Number, and expected Delivery Date. You can display any Purchase Order by clicking its line entry in the Report. View Open Purchase Orders by Job Report You can also look at Open Purchase Orders by Job. From the Purchase Order List, Select: Reports (button) Purchases Open Purchase Orders by Job. View Open Purchase Orders Detail Report You can also look at Open Purchase Orders by Job. From the Purchase Order List, Select: Reports (button) Purchases Open Purchase Orders Detail. Next we ll Receive the Item ordered.
31 31 Receive Items When you Receive Items you ve ordered either with or without a Bill you must enter them into Inventory. First, let s enter Items you received prior to the Bill. From Vendor Center, and the New Transactions (drop down menu) Select: Receive Items. The Item Receipt Form opens. Select: the Vendor (drop-down menu). The Open PO s Exist dialog box opens. QuickBooks alerts you that there are Open Purchase Orders for this Vendor and asks if you wish to receive against one of those orders. Select: Yes.
32 32 The Open Purchase Orders window opens with the Open Purchase Orders for the Vendor displayed. Checkmark: the Purchase Order you want. Select: OK to move the information to the Item Receipt. The information now appears on the Item Receipt. Select: Save & Close to process the Receipt. If you purchased this Item for a specific Job, you can enter it under Customer Job so the Expense shows up in the Job Report.
33 33 Let s take another look at the Item information for 1 2 Vinyl Irrigation Line Hose. The Edit Item shows that there are 18,833 Items on Hand and 0 Items on Order. Even though the Bill hasn t arrived, you can still record the Bill Amount in QuickBooks. It s a good idea, as this will update the Accounts Payable record. Accounts Payable from Chart of Accounts shows Conner Garden Supplies. A/P Aging Summary Report shows Conner Garden Supplies. So let s see what happens when the Bill comes in.
34 34 From Vendor Center, and the New Transactions (drop down menu) Select: Enter Bill for Received Items. The Select Item Receipt window opens. Select: the Vendor (drop-down menu). QuickBooks automatically fills in the Date and Memo fields with Items that have been received without a Bill. Highlight: the Item Receipt that corresponds to the Bill, then Select: OK. The Enter Bills Form opens, with the information filled in. After you have confirmed the information, Select: Save & Close. QuickBooks changes the ITEM RECEIPT to a BILL in the Accounts Payable Account and lists the BILL in the PAY BILLS window. Receive Items and Enter Bill When a Bill arrives with the Items, you can
35 35 accomplish in one step the tasks we just covered. From Vendor Center, and the New Transactions (drop down menu) Select: Receive Items and Enter Bill So we now have 18, Vinyl Irrigation Line Hoses In Stock. Our Customer Vicki Theurer-Davis calls; she s in need of more irrigation hoses for her Irrigation & Lawn Store. Our employee places a Sales Order for the Theurer- Davis, Vicki: Irrigation & Lawn Job for 8, Vinyl Irrigation Line Hoses. This feature is activated in Edit Preferences under Sales & Customers and Enable Sales Orders.
37 37 Selling to Customers Creating Invoices In QBO, be sure to go into the Gear > Companyt Settings > Sales and turn on the options that show Items on your Invoices and Bills not just the Accounts! Select: The Create Invoices icon from the Home Company Center. The Create Invoices form opens. For our purposes, we will use the Product Invoice. From the Template dropdown, Select: Intuit Product Invoice. The Product Invoice will open and will include additional information like shipping vs. billing address, terms and ship method.
38 38 Use the drop-down menu to enter the Customer:Job name. Tab through the fields and enter the Sales Information for the Customer:Job. Use the drop-down menu to fill in the Item Code field. The Wholesale Price Level automatically populates the Price Each (rate) field. See upper left [Wholesale] by Customer:Job title. Check the either the Later or Print Later boxes at the top of the window. Select: Save & Close to record the transaction. Instead of printing and mailing an invoice, you can or fax the invoice. Select: File and Send Forms. The Select Forms to Send dialog box opens. Select: Send Now and the marked invoices will be ed your customers. Your ed Invoice arrives as an attached PDF File, which is not modifiable by the receiver and is easy to download. Sales Orders Note: QBO does not have Sales Orders. Use Estimates instead. Sales Orders allow you to reserve stock for a customer before you actually ship it to them. From Customer Center, and the New Transactions (drop down menu) Select:
39 39 Enter Sales Orders From Customer: Job drop-down menu, Select: Theurer- Davis, Vicki: Irrigation & Lawn The 1 2 Vinyl Irrigation Hoses are big sell Items for our Company, and this employee wants to make sure the Customer gets the hoses she s requested. This is a Sales Order and does not affect revenue. When we re ready to bill the Vicki Theurer Davis in total, we can make this Sales Order an Invoice. The Item List shows 18,833 Irrigation Hose: 1 2 Line in Inventory and 8,000 on Sales Order. The Inventory Item QuickReport shows 0 on Purchase Order and 8,000 on Sales Order so that we will have 10,833 left to sell after my SO is fulfilled.
41 41 From Report Center, Select: Inventory. Inventory Reports The Inventory Reports are displayed. The first Report we want to look at is Inventory Stock Status by Item. This Report displays the Quantity On Hand, On Sales Orders, and On Order for all Inventory Items entered in the Item List. Adjust Inventory Next, we ll prepare to take Inventory and compare our physical count against our QuickBooks records. From Report Center Inventory, Select: Physical Inventory Worksheet.
42 42 We ll count the Physical Inventory and enter the amounts on the blank lines. We re only interested in the 1/ Vinyl Irrigation Line, and the Report shows 18,833On Hand. Now let s look at making adjustments to Inventory when there is a discrepancy between this Report and the amount that has been counted. Let s say that we counted only 18,000 Light Pine Cabinets. Since QuickBooks tells us we should have 18,833 on hand, we need to make an adjustment to our records. From Vendor (menu bar), Select: Inventory Activities Adjust Quantity/Value on Hand. The Adjust Quantity/Value on Hand window opens. Select the Find & Select Items...(button) and Select Irrigation Hose: 1 2 Line and then Add Selected Items Enter: the Adjustment Date, Adjustment Account, and Class that this Adjustment affects. You can make adjustments to either the New
43 43 Quantity or the Qty Difference fields. In the Adjustment Account field, Enter: Inventory Adjustment (an Expense), then press the TAB key. (If you did not set up this Account previously, you can do so now.) QuickBooks calculates the Value Adjustment. Select: Save & Close. Most businesses can accept QuickBooks recalculation of the value, which is based on average cost. You may need to edit the value to change the average cost of in-stock Items. For example, if you sell shoes and have leftover snow boots this summer, they're likely to be worth less than they were when you bought them last fall. To Edit the Value of an Asset: From Vendor (menu bar), Select: Inventory Activities Adjust Quantity/Value on Hand. The Adjust Quantity/Value on Hand window opens. Then Change the Adjustment Type to: Total Value or Quantity and Total Value to change both View Inventory Asset Register From the Chart of Accounts, Double-click: Inventory Asset Account. The Inventory Asset Register opens. The Inventory Asset Account has been decreased by offsetting the expense to the Inventory Adjustment Expense Account. In the Edit Item window, under Inventory Information, the On Hand quantity is now 18,000.