Accounting & Bookkeeping & Small Business Forum

[zoenva]

I am handling the bookkeeping for a friend who has their own tool franchise business. I am posting all of his accounting in Quickbooks however, he has another program that handles all of his transactions. He has way too many customers and a lot of purchases so it wouldn't be feasible to key everything into Quickbooks so I have been posting a lot of journal entries. I have created all of his customers as one customer in Quickbooks and weekly I post his sales as follows:

I credit the Sales account and Sales Tax account and Debit Accounts Receivable. Then I receive customer payments in the Quickbooks.

Whenever he makes a tool purchase, I have been using the cost of goods sold expense.

I need to somehow keep track of his inventory amount so I know I need everything set up differently. Can someone please suggest how I should go about doing this? Any help is greatly appreciated!

[stasia2003]

zoenva wrote: I am handling the bookkeeping for a friend who has their own tool franchise business. I am posting all of his accounting in Quickbooks however, he has another program that handles all of his transactions. He has way too many customers and a lot of purchases so it wouldn't be feasible to key everything into Quickbooks so I have been posting a lot of journal entries. I have created all of his customers as one customer in Quickbooks and weekly I post his sales as follows:

I credit the Sales account and Sales Tax account and Debit Accounts Receivable. Then I receive customer payments in the Quickbooks.

Whenever he makes a tool purchase, I have been using the cost of goods sold expense.

I need to somehow keep track of his inventory amount so I know I need everything set up differently. Can someone please suggest how I should go about doing this? Any help is greatly appreciated!

Lucky for Quickbooks, you don't have to track customers. If he is tracking customers in a different program, is it possible that the file can be exported to an Excel spreadsheet?

Now as far as you lumping everything together, I'm not sure that's a good idea. If you do that, you need to keep hard copies of all the receipts of all those transactions so you will have an audit trail. I know it's time-consuming but in the end, it's well worth it to have detailed records in Quickbooks.

With the inventory, if you don't want to track that in Quickbooks, you can use a spreadsheet but that will be tedious and can result in more errors. But if you use Quickbooks for your inventory, I suggest you take a handcount of the inventory and adjust it in Quickbooks accordingly. March 31 is right around the corner, so that may be a good time to check inventory and catch it up.

You seem to be debiting and crediting to the appropriate accounts but if you're going to use the Cost of Goods Sold account, you probably should use the Inventory account as well. With purchases, you debit COGS and credit Inventory. If you are going to use Quickbooks to prepare financial statements, then your numbers are going to be distorted because of the lack of the inventory account. You may be able to get around it if you are tracking inventory in a different system by preparing your financial statements in Excel.

I'm sure others on here will have suggestions too.

Good Luck. :D

[zoenva]

What if I created an asset account called "Inventory". And use Cost of Goods sold as the offsetting account.

Then, periodically, adjust that to an updated report from the other system.

Would this work even though I have been posting his tool purchases from vendors to the COGS acct? Or should I handle a different way?

Thanks!!!

[stasia2003]

zoenva wrote: What if I created an asset account called "Inventory". And use Cost of Goods sold as the offsetting account.

Then, periodically, adjust that to an updated report from the other system.

Would this work even though I have been posting his tool purchases from vendors to the COGS acct? Or should I handle a different way?

Thanks!!!

My answer here is being revised a little since I misread your original post. What you should do is take a hand count of the inventory. If you are going to use Quickbooks for COGS, you need to use it for Inventory as well. Those two accounts go hand in hand. It will get tedious trying to maintain inventory and COGS in two programs and may result in more errors. And you will probably be violating a Generally Accepted Accounting Principle.

When you are making a purchase, you are to:

DR Inventory
CR Cash or Accounts Payable

When the inventory is SOLD you:

DR Cost of Goods Sold
CR Inventory

Cost of Goods Sold and Inventory is valued at COST.


If you have been posting purchases into the COGS account, that needs to be corrected right away because the financial statements will be wrong.

[Richard Noot]

I agree that you should use cost for valuing inventory. It is for this reason that you should NOT use quickbooks for inventory. If you insist on using quickbooks you will need to reconcile your inventory between what the IRS requires and the way quickbooks handles it. To avoid this, you are better off using a spreadsheet.

[zoenva]

I was still confused on how to do this so I created a dummy company in quickbooks and this is what I did:

-I created 'inventory asset' in other current assets

-I created an item called 'snap on tools' as an inventory part (the main company the owner purchases from and who generates his reports) and selected 'sales' as income

-I created an item called ‘other tools’ because sometimes he buys tools from other vendors that won't show up on snap on reports

I also created an item called sales tax and entered the tax dept as the vendor. I had to do this because sometimes on his snap on report, the tax amount varies.

Each week, I will create sales receipts for total sold daily and select 'snap on tools' as the item

When I ran financial reports in QuickBooks for the dummy company it looks correct.

The only problem I'm going to have is when he purchases from outside vendors. I have sent the owner an email to ask how this affects his snap on reports...does he still invoice the customer even though he didn't purchase from snap on. If so, he isn't doing it correctly.

Also I am gonna have to delete all of the jounal entries I created, ugh!

Anyway, if this sounds like the best solution, please let me know.

Thanks!

[stasia2003]

zoenva wrote: I was still confused on how to do this so I created a dummy company in quickbooks and this is what I did:

-I created 'inventory asset' in other current assets

-I created an item called 'snap on tools' as an inventory part (the main company the owner purchases from and who generates his reports) and selected 'sales' as income

-I created an item called ‘other tools’ because sometimes he buys tools from other vendors that won't show up on snap on reports

I also created an item called sales tax and entered the tax dept as the vendor. I had to do this because sometimes on his snap on report, the tax amount varies.

Each week, I will create sales receipts for total sold daily and select 'snap on tools' as the item

When I ran financial reports in QuickBooks for the dummy company it looks correct.

The only problem I'm going to have is when he purchases from outside vendors. I have sent the owner an email to ask how this affects his snap on reports...does he still invoice the customer even though he didn't purchase from snap on. If so, he isn't doing it correctly.

Also I am gonna have to delete all of the jounal entries I created, ugh!

Anyway, if this sounds like the best solution, please let me know.

Thanks!

The more you talk, the more I get a little confused... :lol:

So what you're saying is, the snap on reports are outside reports and not from your own internal system? If so, then you still need to have your own inventory reports done. You can use the outside reports for reconciliation or for doing the internal audit of the inventory.

You typically only need one inventory account since you have one kind of inventory, Tools. Since the other vendors don't show up on the snap on reports, then you definitely need to keep track of inventory somewhere, whether in Quickbooks or Excel.

About the sales tax. Make sure it's being calculated properly. Because here in Florida, the person who's receiving the delivery is taxed at the rate for their county(plus the state rate). So I'm not sure if the tax amount should vary for your boss.

Are these tools you're referring to actually "snap on" to something? Or are they your typical tools like the wrench, screwdriver, etc?

As far as having your inventory valued, you need to have an inventory account set up in Quickbooks because it's related to the COGS account. But you can track inventory items outside of Quickbooks and take that total and match it in Quickbooks. First and foremost, just get the ledger account for that set up. And, make sure it's valued at COST. That's very important.