If you send materials to another company for processing or assembly, such as adding a logo or other art to a product, assembling the individual parts to create an item, or painting an item, then you may need to track those materials and items for financial reporting.
Even though the items are being provided to someone outside of your company, they are resources that you own, and remain part of your inventory (ownership does not transfer) and does not reduce your inventory or any Balance Sheet Accounts, as they are just being temporarily moved to another location and returned to your company at some point.
Typically, when you build assemblies in QuickBooks, your inventory is reduced for the items used in the assembly and increased for the number of Assembly Items available for sale.
If you send your individual parts to an outside company to assemble, then even though you own those parts and the items, you don't necessarily have the items on hand and do not have an accurate count of items that are available for sale or available for use in other assemblies.
To track this in QuickBooks, you can:
This approach is fairly simple, however remember that QuickBooks does not prevent you from using parts involved in a pending build. This means that:
To include the cost of processing or finishing in your tracking, you can:
This method allows you to include the cost of the processing or finishing in the final item so that the average cost used when the item is sold accurately reflects all the costs involved in making and finishing the item.