Accounting & Bookkeeping & Small Business Forum

[Guest]

Does anyone out there use the Inventory portion of Quick Books Pro - I took over a company's books on 4/1/03 - The prior bookkeeper kept up with the inventory manually - but I set it up for the computer to do the work. My question is - cost of goods sold account post a debit each time product is sold, yet my expense account post a debit when I purchase the product from the vendor. Is this correct or am I having a blonde moment?

[Guest]

When you buy something from a vendor for resale you should debit inventory, an asset account. You are correct that when you make a sale, that is when you debit the COGS account (and credit inventory). You don't book the expense until the item (current asset) is sold.

[Guest]

I believe you will find that the old bookkeeper had it right. Current and previous releases of Quick Books do not handle inventory very well. It can only use the average cost method. It will not handle LIFO or FIFO. Hope this helps.

[Guest]

When the product is purchased from the supplier the debit should be to Inventory not Cost of Goods Sold.

[Guest]

Hi Charlotte,

You should take a look at a couple of things to nail down where the problem is coming from. First, in your inventory item setup, check what "accounts" are being posted to automatically when complete a transaction with that item. These accounts will be your base to track the transactions through. Second, check what accounts are setup to hit automatically when you "sell" and item (probably Accounts Receivable setup) and for Purchases (probably AP).

Next, write down the T accounts that should be being posted. In a non-mfg environment, you should debit Inventory/credit AP at the purchase. At the sale, debit CGS/credit Inventory for the inventory value, plus debit Cash or AR/credit sales for the actual sale amount. The AP transaction is completed at the payment with debit AP/credit cash.

Try a test transaction out in a test company and mark the transaction with an obvious transaction ID. Then post each of these sections. Follow them through up to the detailed General Ledger. Are they posting this way? If not, go back to your setup of each of these areas and see which ones are setup incorrectly.

Hope that helps.

Micki