With QuickBooks Desktop, you can easily track inventory but for this, you need to know how the QuickBooks handles inventory assets, average cost and Cost of Goods Sold. This article will help you in understanding the average cost know what partition of the report helps you with inventory management.
If you are setting up inventory list for the first time, two accounts will automatically by QuickBooks to your company file’s chart of accounts:
- 12100 – Inventory Asset – Other Current Asset
- 50000 – Cost of Goods Sold (COGS) – Cost of Goods Sold
Additionally, an income account is required for every single inventory item. You don’t have to use any accounts that are set up automatically. You also have the option to set up your personal accounts or subaccounts.
Note: If any of the account numbers are added already, the next available number to the new accounts will be assigned by QuickBooks Desktop.
The bill, check or credit card charges will charge Inventory Asset Account item and credit your A/P, bank or credit card account every time an inventory item is purchased. It doesn’t get charged to an expense account because it is considered as an asset that can be used for future positives and the expenses recorded for matching the income.
Running the Inventory Valuation Summary/Detail report for each date is considered as the best option to track your purchased inventory.
Cost of Goods Sold
The Cost of Goods Sold (COGS) only get affected while selling your inventory items on invoices or sales receipts. Whenever you sell and inventory item, you need to open the Transaction Journal Report for invoice/sales receipt and the Sales/Accounts Receivable transaction pops-up and the Inventory/COGS transactions are visible that credits the Inventory Asset account and charges the COGS accounts.
However, selling inventory that is not available in your account, it can force upcoming bills, checks, or credit card deductions for managing Inventory Asset account COGS account. The amount on each side of the Inventory/COGS transaction is: Number of Items Sold x Average Cost of Item.
QuickBooks requires weighted average cost for identifying your inventory value and debit amount to COGS while selling inventory. The sum of cost of all items in inventory divided by the item quantity is the average cost.
- If a widget is purchased for $2.00, the average cost will be $2.00.
- If a widget is purchased for $1.50, the average cost will be $1.75.
- If you sell a widget, the inventory/COGS transaction will charge COGS for $1.75 and credits inventory for $1.75.
- If a new widget is purchased for $2.00, the average cost will become $1.88.
If you have a query about any average cost, the best action that can be perform is to use the Inventory Valuation Summary report. This displays how QuickBooks Desktop contains item’s average cost.
- From the Reports menu, choose Inventory.
- Click on Inventory Valuation Summary and then select dates to All.
- Double-click on the item in question.
Get Help For QuickBooks Desktop Issues
The provided solutions should be helpful for you in understanding inventory assets and costs of goods sold tracking so that you can keep you inventory up to date. However, there can be some situations when you can face several issues while managing your inventory, you can connect with us through our technical assistance team by dialing the toll-free QuickBooks Support Phone Number +1855-565-6250 and get instant solutions for all your errors and issues related to QuickBooks Desktop.