Are you seeking help to learn about Inventory Assets and Cost of Goods Sold Tracking in QuickBooks Desktop? Here you will learn everything about this, adoption of QuickBooks Desktop will make your Inventory tracking easier. But to proceed with this successfully, you must be aware of how QuickBooks handles inventory assets, average cost, and cost of goods sold.
We come with this blog to help you in understanding the average cost and know what portion of the report helps you with inventory management. Let us begin the discussion without taking your very much time. Stay attached to our Wizxpert Services, we choose our topics from frequently asked questions and then come with our new articles.
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How to Handle Inventory Account, Inventory Assets and Cost of Goods Sold Tracking in QuickBooks?
Here you will learn about Inventory Accounts, Inventory Assets and Cost Of Goods Sold tracking in QuickBooks as well as the method of calculating average cost.
QuickBooks will automatically add two accounts to your company file’s Chart of Accounts at the time of setting up your first inventory item in your Inventory List.
- 12100 – Inventory Asset – Other Current Asset
- 50000 – Cost of Goods Sold (COGS) – Cost of Goods Sold
Additionally, each inventory item requires an income account. You must need to use either of the automatically set up accounts. It offers a facility to set up your accounts or subaccounts.
Note: If one of these account numbers you have already added, the next available number to the new accounts will be assigned by QuickBooks Desktop.
All the charges will be paid and debit the item’s inventory asset account and credit your A/P, bank, or credit card account when you are brought an inventory item, your Bill, Check, or Credit Card. Charges will not be deducted to an expense account because it is an asset that helps to sell out for future benefits, and recording the expense to match the income.
Running of the inventory valuation summary/Detail reports for all dates will be considered as the best way to track the inventory purchases.
Cost of Goods Sold
Inventory Cost of Goods Sold will only be affected when you sold out inventory items on invoices as well as sales receipts. When you are ready to sell out an Inventory item, run the ‘Transaction Journal Report’ for the invoice/sales receipt and you will check out the Sales/Accounts Receivable transaction appear to you and also you’ll see the Inventory/COGS transactions which credit the Inventory Asset account and debits the COGS accounts.
Although if you are willing to sell inventory that does not have, simply force the next bills, checks, or credit cards, for adjusting both the Cost of Goods Sold Account and Inventory Asset account.
Note: The amount on the particular side of the Inventory/COGS transaction will be calculated as: “Number of Items Sold” x “Average Cost of Item”.
To determine the value of your inventory and the amount you have debited to Cost of Goods Sold at the time of selling inventory, QuickBooks works with a weighted average cost. The average cost will be calculated as the sum of the cost of all items in inventory divided by the number of items.
- When you purchase a widget for “$2.00”, then the average cost is $2.00 after calculation.
- When you purchase another widget for “$1.50”, then the average cost is now “(2 + 1.5) / 2 = 1.75” after calculation.
- When you sell out a widget, the inventory/COGS transaction debits the Cost Of Goods Sold for “$1.75” and credits inventory for “$1.75” after calculation.
- When you purchase another second widget for “$2.00” then the average cost will be calculated as “(1.75 + 2.00) / 2 = 1.88”
If you have any kind of doubts related to the average cost, the best course of action is to run the ‘Inventory Valuation Summary report’. This will define and represent how QuickBooks will get the average cost.
- You have to choose “Reports” and then click on the “Inventory”
- Now Click on the “Inventory Valuation Summary”, then simply set the dates to All
- You have to click twice on the item in question.
Hopefully, we have successfully settled down your queries belonging to inventory assets and Cost of goods sold tracking in QuickBooks, But if the issues still occur then check out the expert services made available in this article. You can get connected to our WizXpert Proadvisors through the 24/7 help desk technical error support number +1-855-441-4417 and fix out all your queries from your location by getting other reliable solutions.