Full Answer
• Inventory Costing Method – QuickBooks Online uses the First in First Out method of inventory costing. This means that the first inventory part purchased is the first part sold when making sales.
QuickBooks Online lets you manage simple inventory for your business. It lets you purchase using purchase orders and includes the option to complete backorders. You can track quantities on hand and report on the inventory parts. You can sell inventory and QuickBooks automatically updates the quantities on hand.
Individually allocating costs to single items is the most accurate method of tracking inventory, but is also time consuming if you have a lot of transactions to enter. This method is best for companies that deal in small numbers of inventory items or sell unique products, such as custom-furniture makers or dealers in collectibles.
The Inventory Stock Status by Item report is used when: A list is needed of the quantity of inventory on hand and on order Vendor reports can be accessed in QuickBooks in all of the following ways except: All of these. Report Center, Vendor Center, and Report Menu. What QuickBooks activity comes next in this string of business activities?
It's also less accurate, especially if the your material costs fluctuate widely between purchases.
Average cost is the only inventory valuation method included with Quickbooks out of the box. It is the most simplistic way of accounting for inventory. The total cost of a particular item is divided by the number of items currently held in your inventory. QuickBooks recalculates the average cost of the entire inventory when you enter a new purchase. Using average cost requires less record keeping than other inventory costing methods because the purchase dates don't matter. It's also less accurate, especially if the your material costs fluctuate widely between purchases.
The Intuit Marketplace features a variety of third-party add-ons that expand QuickBooks' inventory management capabilities. Prices range from free to thousands of dollars. The Marketplace lists compatibility with QuickBooks editions so you don't waste money buying add-ons that won't work with your system. Check the customer ratings before purchasing any expensive add-ons. Each add-on offers its own set of features, such as bar-code reader integration, links to your company's e-commerce website for real-time inventory updates, forecasting modules and purchasing management. Certain add-ons may be industry-specific, such as AIMS for garment manufacturers.
Both are more accurate than average cost method because the value of your inventory is based on the price at the time of purchase. With the FIFO method, the first items placed in your inventory will also be the first items sold. Under the LIFO method, the last inventory items purchased will be the first sold.
QuickBooks also automatically calculates the last shipment cost, including freight. You can use this field for internal reference to compare the current price of an item with your last purchase. When you enter inventory items on a customer invoice, the program will calculate the cost of goods sold.
When you set up your first inventory item in your Inventory List, QuickBooks automatically adds two accounts to your company file's Chart of Accounts:
When you buy an inventory item, your Bill, Check or Credit Card Charge will debit the Item's Inventory Asset account and credit your A/P, bank or credit card account. It is not debited to an expense account because it is an asset that you can sell for future benefit and you record the expense to match the income.
Normally, inventory COGS is only affected when you sell inventory items on invoices or sales receipts.
QuickBooks uses the weighted average cost to determine the value of your inventory and the amount debited to COGS when you sell inventory. The average cost is the sum of the cost of all of the items in inventory divided by the number of items.
Inventory Costing Method – QuickBooks Online uses the First in First Out method of inventory costing. This means that the first inventory part purchased is the first part sold when making sales. This fits the needs of most small businesses. This is different than the QuickBooks Desktop which uses the Average Weighted Cost method.
The purchase order in QuickBooks can be used to order both products and services. You can enter account details or item details. In the case of inventory, you must use the Item Details section to record the order of inventory parts. The purchase order is a non-posting transaction. This means no accounting entry is made until the items are received and a bill is entered against the PO. To enable purchase orders:
You may need to adjust the quantity on hand for inventory products due to damaged, lost or incorrect quantities. QuickBooks lets you do this one item at a time on the Products & Services List or from the Create menu.