Watch a 2-minute tutorial about inventory tracking
You can use QuickBooks to track the items you keep in inventory and sell to your customers.
If your business purchases items that are ready for resale, keeps
them in inventory, and then sells them, QuickBooks can track the current number
in stock and the value of your inventory after every purchase and sale.
QuickBooks can even keep track of products you assemble and resell (finished
goods), adding assembled units to inventory and deducting component units from
inventory when you build assembly items (QuickBooks Premier or Enterprise
Here are the benefits of setting up inventory parts as items and using
QuickBooks inventory tracking:
When you use purchase orders to buy inventory items, QuickBooks updates your
inventory, so you know which items are on order and when they're due to be
You can easily keep track of the cost to you of the items you have sold (the
cost of goods sold).
You can easily keep track of the income you receive from the resale of
You always know your current quantities on hand.
You always know the current value of your inventory.
Set up inventory tracking in QuickBooks
You'll turn inventory tracking on and add some accounts for tracking inventory value and income from selling inventory. You'll also add inventory items to the Item list.
This task requires a series of three steps:
Turn inventory tracking on and set inventory preferences.
To do this task
Only the QuickBooks Administrator can do this task.
Open the items and inventory preferences.
Go to the Edit menu and click Preferences.
In the list at the left of the Preferences window, click Items & Inventory.
In the list at the left of the Preferences window, click Items & Stock.
Click the Company Preferences tab.
On the Company Preferences tab, select the Inventory and purchase orders are active checkbox.
The next step in using inventory tracking is setting up the inventory accounts you need.
Set up the inventory accounts you need.
Turn on inventory tracking, if you have not yet done so.
Add the following inventory accounts to your chart of accounts:
Note: For any of these accounts, you can set up subaccounts within the account to track the value, income, or costs of different types of inventory.
Inventory Asset (account type = Other Current Asset): This account tracks the current value of your inventory. You don't have to create this account—QuickBooks creates it automatically when you set up your first inventory item.
Sales Income (account type = Income): This account tracks the income from the resale of inventory items. QuickBooks may have already created this account for you based on the information that you entered in the EasyStep interview.
Go to the Lists menu and click Chart of Accounts. See if an account called Sales Income is in the list with Income in the Type column.
Cost of Goods Sold (account type = Cost of Goods Sold): This account tracks the cost to you of the items you have sold. On a profit and loss report, QuickBooks subtracts the total cost of goods sold from your total income to provide a gross profit before expenses. You don't have to create this account—QuickBooks creates it automatically when you set up your first inventory item.
The next step in using inventory tracking is adding the inventory part items to your item list.
Add inventory items to the Item List.
What is an inventory part item?
In QuickBooks, an inventory part is one of the types of line items you can
use when you're filling out a sales form or purchase form. You use inventory items to track merchandise your business purchases, keeps in stock as inventory, and then resells. For each inventory item, QuickBooks tracks the current number in stock and the average value of your inventory after every purchase and sale.
What's the difference between inventory and non-inventory parts?
Inventory parts are items that you buy and then stock for a while before selling. QuickBooks tracks the quantity on hand, the current inventory value, and the average cost of your inventory items. It also tracks some accounting information like "cost of goods sold" for inventory items that you have sold.
Non-inventory parts are items that you purchase (usually on behalf of a specific customer) and then immediately sell or install, or items that you sell without ever buying. For non-inventory parts, QuickBooks will only track how much you have spent or taken in. Some people use non-inventory parts even for items that they stock because they prefer a simpler approach—even though it gives them less information.
Important: Do not create separate inventory part items
for sales and purchases. You must use the same inventory part item on both sales forms and purchase orders to keep your inventory accurate.
The sales forms available in QuickBooks are:
Sales receipts (if you get paid immediately by cash, check, or credit
Invoices (if you get paid later)
Credit memos (for recording a return, a refund, or an overpayment)
Statements (or billing statements, for periodic billing or to let your
customer know how much is past due)
Estimates (also known as bids, grants, or proposals, for describing work or products you propose to a customer)
Invoices or sales receipts are the forms that you give to your customers to
confirm their orders. Even if you do not want (or need) to give your customers
a printed copy of the QuickBooks invoice, you should still use the invoice or
sales receipt form to enter your sales into QuickBooks (so that your income
information is up to date).
Depending on your type of sales business, you can enter each customer
purchase on a separate sales form, or you can enter a daily sales summary of
all your sales.
Can I convert a non-inventory part item into an inventory part item?
Examples of inventory items for a contracting business
These instructions tell you how to add inventory part items one at a time. Follow these steps if you are new to QuickBooks. Otherwise, you can use another window to add or edit multiple inventory items and paste from Excel.
Set up the accounts you need, if you have not already done so.
In the Company section, click Items & Services.
Click Item at the bottom of the list and click New.
Click the Type drop-down list and click Inventory Part.
If Inventory Part isn't on the list, you need to
turn inventory tracking on.
Enter an item name or number.
What you enter here is displayed in the drop-down list of items
when you're filling out a sales form or purchase order. Enter a
name or number that will help you distinguish this item from all
the others on the list.
If this item is a subitem
of an existing item, select the Subitem of checkbox and
choose the parent item.
Subitems enable you to create a hierarchy of items so that you
can group information about similar items in sales reports and
graphs. Subitems are primarily for your own convenience. They look
the same as items on sales forms and purchase orders.
In the New Item window, create the "parent" item (that
is, the item that will have subitems) first.
If you won't be using the parent item on invoices and sales
forms, you can leave the rate or price of the parent item at zero.
However, you must assign an account to the item. QuickBooks
requires an account even if you don't plan to sell the
Create the subitems:
Each subitem must be the same type as its parent item.
To make the item a subitem, select the Subitem of checkbox
and choose the name of the parent item.
(Optional) If you know it, enter the manufacturer's part number.
(Optional) If unit of measure is available, assign a unit of
In the Unit of Measure section, click the drop-down arrow and then do one of the following:
Click an existing unit of measure (Single U/M Per Item mode) or an existing unit of measure set (Multiple U/M Per Item mode).
The first unit defined in a unit of measure set and is usually the smallest unit of measure used for an item when purchasing it, tracking it in inventory, and selling it. In QuickBooks, the base units of items are used to count inventory, generate most inventory reports, and perform quantity-related calculations.
Important: When you create an inventory item, the cost, sales price, and on hand quantity you enter are all for the base unit.
A unit defined by the number of base units it contains. For example, if the base unit is foot, a related unit might be yard, which is defined as containing three feet.
Related units make it possible to show quantities of the same item in different measurements in different places in QuickBooks.
For example, you might purchase an item called Cable in spools, count that item in inventory by the foot, and sell it by the yard. By creating a unit of measure set with a base unit of foot and related units of spool (containing 500 feet) and yard, you can enter a quantity of spools on a purchase order, show the item in feet on inventory reports, and enter a quantity of yards on an invoice.
Consists of a base unit and any number of related units.
When you create a unit of measure set, you can also specify which unit of measure should appear by default when adding an item to a purchase form, a sales form, and a shipping pick list. You also give the set a name, such as "Length by the foot."
Once you've created a unit of measure set and assigned it to an item, you can easily convert to other units of measure within the set when you add the item to a transaction. Continuing with the previous example,
if you add the Cable item to an invoice with a quantity of 10 yards, you could then convert that quantity to 30 feet or 0.06 spools.
Note: Unit of measure sets are available only when Multiple U/M Per Item is selected as the unit of measure mode.
Click and then complete the wizard to assign a new unit of measure.
Note: If you see the Enable button instead of a drop-down arrow, click Enable and then complete the wizard to turn unit of measure on and assign a unit to this item.
Fill in the Purchase Information fields. More...
(Optional) Enter a brief description of the item in the Description on Purchase Transactions field. Keep in mind that this is the item description your vendors will see.
Note: What you enter in the Description on Purchase Transactions, Cost, and Preferred Vendor fields will appear by default whenever you add this item to a purchase form. If you need to, you can change any of this default information when you're filling out the form.
(Optional) In the Cost field, enter either the last amount you paid for this item or the amount you expect to pay when you next buy it.
Note: If you've set a default markup percentage, you have to enter a cost if you want QuickBooks to automatically calculate the sales price.
The Cost of Goods Sold account is preselected in the COGS Account field. You can choose a different account if you want to.
(Optional) Click the Preferred Vendor drop-down list and choose the vendor you usually buy this item from. The preferred vendor appears on the Stock Status by Item report and on the Physical Inventory Worksheet.
Fill in the Sales Information fields. More...
(Optional) Enter a brief description of the item in the Description on Sales Transactions field. Keep in mind that this is the item description your customers will see.
Note: What you enter in the Description on Sales Transactions field, Sales Price field, and Tax Code field (if applicable) will appear by default whenever you add this item to a sales form. If you need to, you can change any of this default information when you're filling out the form.
In the Sales Price field, enter the price you will most often charge customers for this item.
If you've set a default markup percentage and entered a cost in the Purchase Information area, QuickBooks calculates and enters the sales price for you. You can change this price if you need to.
If you charge sales tax, click the Tax Code drop-down list and choose a tax code for this item.
If you don't charge sales tax, you won't see the Tax Code field.
Click the Income Account drop-down list and choose the account where you want income from the sale of this item recorded.
Fill in the Inventory Information fields. More...
The Inventory Asset account is preselected in the Asset Account field to track the current value of your inventory. You can choose a different account if you want to.
Note: If you use the same account for all your inventory items, the current balance of this account represents the current total value of your inventory.
(Optional) When the quantity of this item gets down to the number you enter in the Reorder Point field, QuickBooks reminds you to order more.
Note: The Inventory to Reorder option must be selected in reminders preferences for this feature to work.
If you track inventory at multiple sites, the reorder point represents the global reorder point across all sites. You can track multiple inventory sites with the Advanced Inventory add-on which is only available in QuickBooks Enterprise Solutions (additional fees may apply). Learn more at www.qbes.com/inventory.
(If Advanced Inventory is turned on) Click Inventory Site Info to enter the reorder points and quantity on hand for each site. You can also enter reorder points for multiple items in one window.
If you already have some of this item in inventory, enter the quantity in the On Hand field. Otherwise, leave the quantity at zero.
The total value of an item is its cost multiplied by the quantity on hand. If you already entered both a cost and the initial quantity on hand for this item, QuickBooks enters the total value for you. If you don't have any of this item in inventory yet, leave the value at zero.
The As of date applies to the On Hand and Total Value information. Today's date is pre-selected, but you can choose a different date if you need to.
Important: If you're converting a non-inventory part item or other charge item into an inventory part item, the "As of" date must be after the date the non-inventory part or other charge item was last used in a transaction.
Click anywhere in the line containing the item.
Click Reports at the bottom of the Item List window and click QuickReport.
Scan the report for the latest transaction date.
(Optional) Click Inventory Site Info to set site specific reorder points. You can track multiple inventory sites with the Advanced Inventory add-on which is only available in QuickBooks Enterprise Solutions (additional fees may apply). Learn more at www.qbes.com/inventory.
(Optional) Click Custom Fields to fill in or define
custom fields for this
Click OK to record the item, or click Next to record the item and start
Change (edit) an inventory part item
Add or edit multiple inventory part items
Inventory assembly item overview
Create an inventory assembly item
Overview about inventory
Use the right purchase and sales forms to keep inventory figures accurate
When you purchase inventory, you'll need to enter the inventory items on a purchase form so QuickBooks can properly increase inventory quantities. Then, when you sell inventory, you'll need to enter the inventory items on a sales form so QuickBooks can properly decrease inventory quantities.
What kind of forms can I use for inventory items?
You can use any of the following forms to record inventory purchases: purchase orders, bills, credit card charges, and checks.
Note: Inventory items entered on a purchase order are not added to inventory in QuickBooks until you create a bill or item receipt from the purchase order.
You can use sales orders, invoices, and sales receipts to record inventory sales.
Note: Inventory items entered on sales orders are not deducted from inventory until you create an invoice from the sales order.
You may not always have enough inventory to fulfill a customer's order. If
you use sales orders, you can partially fulfill an order, and QuickBooks tracks
the backordered items on both the sales order and the invoice. Similarly, your
vendors may not always have all of the inventory items to fulfill your order.
If you use purchase orders, you can receive a partial order from a vendor, and
QuickBooks tracks the backordered items on the purchase order.
When an order for inventory items is partially fulfilled, the portion of the order that has not yet been fulfilled is called a backorder. QuickBooks can track backorders both for orders your customers place with you (outgoing inventory items) and for orders you place with vendors (incoming inventory items).
Backorder tracking is only available in the Accountant, Manufacturing and Wholesale, Retail, and Enterprise editions. Learn how to upgrade your version of QuickBooks.
Periodically take a physical inventory
Over time, actual inventory quantities can get "out of sync" with inventory quantities in QuickBooks for any number of reasons, such as breakage, theft, and entry errors. You'll want to take a physical inventory periodically and then adjust your inventory as necessary.
You can print a worksheet for taking a physical count of your inventory items.
Choose Reports > Inventory > Physical Inventory Worksheet.
(Optional) Click Modify to customize the report.
Use the Display tab to change what does or doesn't appear on the report.
Use the Filters tab to narrow the list of items that appear on the report.
Click the Print button.
(Optional) Make changes to the print settings as necessary. More...
Click the Printer name drop-down
arrow and then click the name of the printer you want to use.
What is the Intuit Internal
Make any other changes and then click OK.
A file that you can edit in a word processor. In this format, spaces appear
between columns of text.
When you work with this file in the word processing program, use a
non-proportional type font (such as Courier) to make the columns align as they
do on the report or list.
A file you can edit in a spreadsheet program. In this format, commas appear
between columns of text, and quotes appear around text but not around
Lotus 1-2-3 calls this type of file a.PRN file, while Microsoft Excel calls
it a.CSV file.
A file you can edit easily in a spreadsheet program or a word processor. In
this format, tab characters appear between columns of text.
You can change the properties of your particular type of printer.
Most people don't need to make these changes.
Make changes to any of the following options:
Orientation (to portrait or landscape).
Paper source (which tray the paper comes from, or change to manual feed).
Graphics and printer features.
When you're finished making changes, click OK.
In the Printer Setup window, click OK again to
save your changes.
Orientation: Portrait or Landscape
For some print jobs, such as reports, orientation is a matter of
preference. If you're printing on a form, however, you must set
the orientation to match the design of the form.
Landscape orientation means
your page is short and wide.
Portrait orientation means
your page is tall and thin.
The procedure to change page orientation depends on what
Reports, lists, and
Sales and purchase forms
Smart page breaks
QuickBooks automatically improves the presentation of printed reports by
preventing awkward page breaks.
Within small groupings of data, QuickBooks avoids splitting related data
across two pages. Within larger groupings, QuickBooks chooses the most logical
place to insert a page break.
Page break after each major grouping
Some reports group information into major categories such as customer,
vendor, employee, or even type of account. For instance, the major groupings in
a balance sheet report are "Assets" and "Liabilities &
When printing a report that contains major groupings, select this option to
start each major grouping on a new page.
This option is not available for reports that contain only small groupings.
For example, most transaction reports have this option, but most summary
reports do not.
Fit report to __ page(s) wide
When a report has too many columns to fit across the width of a single page
of paper, QuickBooks prints the extra columns on additional pages. Select this
option to scale down reports so that all columns fit across a single page or to
specify the number of pages.
Note: If the report would normally print across fewer than the
selected number of pages, QuickBooks does not scale the report up.
In the Page Range section,
In the From field, enter the number of the first
page you want to print.
In the To field, enter the last page number you
want to print.
Make any other changes and then click OK.
Number of copies*
Enter the number of copies you want to print of each page of the form you
If you are printing voucher checks or paychecks, the Number of
copies field appears only if you have a
page-oriented printer. If you have a
continuous-feed printer, you
can print additional copies by using multiple-part check stock.
Print in color
Select this checkbox if you have a color printer and you want the document
to print in color.
You can enter margins in inches, millimeters, centimeters, picas, or points.
To change a unit of measure, use one of these abbreviations when you enter the
Click this button to see what your current document will look like when you
print it. This can save you a lot of paper!
If you don't have a document open, you'll see a sample of the form
that is shown in the Form Name field at the top of the window.
* Indicates the option does not appear
when you open this window by going to the File menu and choosing Printer Setup. The
option does appear in the Print Report window.
Printer setup versus form-specific
Troubleshooting report problems
Take the printed worksheet with you as you count your inventory items and enter each item quantity in the Physical Count column of the worksheet.
After completing your count, compare the quantities in the Physical Count column to the quantities in the On Hand column on the printed worksheet.
The on-hand quantities are the quantities currently recorded in QuickBooks.
If there are any discrepancies, make an inventory adjustment to make the on-hand quantities match the physical count quantities.
Get the most out of a
Determine the value of your inventory
You'll need to know the value of your inventory from time to time to make certain business decisions. You can run a report anytime to see the value of your inventory.
Use your QuickBooks Inventory Reports to look at the value of your inventory
based on quantity on hand,
average cost, retail value, and more.
Click the Report Center icon at the top of the QuickBooks window.
Click Inventory at the left of the Report Center window and then click one of the following:
Inventory Valuation Summary
How do I create this report?
Go to the Reports menu, click Inventory, and then
click Inventory Valuation Summary.
This report summarizes the value of your inventory. For each
inventory item, the report shows the item name, description, unit
price, quantity on hand,
average cost, asset
value, percent of total inventory value, sales price, retail value,
and percent of total retail value.
The report shows inventory value for the current
month, but you can change the period of time covered by the report
by choosing a different date range from the Dates drop-down
What do the
different date ranges mean?
Get the most out of
report for reuse
Inventory Valuation Detail
Go to the Reports menu, click Inventory, and
then click Inventory Valuation Detail.
This report lists the transactions that affected the value of
your inventory during a particular period of time.
The report covers the current month, but you can
change the period covered by choosing a different date range from
the Dates drop-down list.
Inventory Valuation Summary by Site
Choose Reports > Inventory > Inventory Valuation Summary by Site.
This report summarizes the value of your inventory at each site and groups your inventory items by site. The report shows the item name, description, quantity on hand, average cost, asset value, percent of total asset value, sales price, retail value, and percent of total retail value for each inventory part.
The report shows inventory value for the current month. To change the period of time covered by the report, click the Dates drop-down arrow and choose a different date range.
What do the different date ranges mean?
Memorize a report for reuse
If you want a hard copy of the report, click Print.
(Optional) Make any necessary changes to the print options.
Get the most out of a report
Other ways to analyze inventory
Check the status of your inventory
At times, you'll want to know the quantity of certain items in inventory. You can check the status of a single item or of your entire inventory.
You can get the following information about your inventory by checking its
The minimum quantity of a particular inventory item that you want to have in
stock at any given time. When the quantity reaches the reorder point, it's
time to order more of the item. If you use Advanced Inventory, you can also set reorder points for particular sites. (Only available in Enterprise Solutions. Additional fees may apply. For more information visit www.qbes.com/inventory).
You set the reorder point for an inventory item when you add it to your Item
list. By using your Reminders list, you can have QuickBooks remind you when
it's time to reorder a particular item. Note: If you use Advanced Inventory, reminders only notify you of the global reorder point.
Quantity on hand
For a particular item, the quantity on hand is the number of items you
currently have in stock. QuickBooks automatically keeps track of this number for all the inventory items in your Item List. QuickBooks can also track the number of items at different sites with the Advanced Inventory add-on which is only available in QuickBooks Enterprise Solutions (additional fees may apply). Learn more at www.qbes.com/inventory.
It increases when you purchase new inventory or receive items you ordered
through a purchase order. For example, if you have 30 faucets on hand and then
discover that you need 20 more, QuickBooks increases the quantity on hand to 50
when you indicate that you have received the 20 faucets—either by
entering an item receipt or bill for the faucets, or by paying for the faucets
directly with a check or credit card.
It decreases when you sell items by writing an invoice or entering a sales
receipt, or when you make an inventory adjustment to account for theft or
damage. For example, if you have 50 faucets and then sell 30 of them,
QuickBooks decreases the quantity on hand to 20.
For an inventory item, average cost is the total cost of the items currently
in stock divided by the number of items in stock. You can set up QuickBooks to use average
cost or FIFO to determine the value of your inventory.
Note: FIFO is only available with QuickBooks Enterprise Solutions Advanced Inventory.
QuickBooks recalculates the average cost of an item every time you record
the purchase of more units of the item. It adds the cost of the new items to
the cost of the old stock and then divides by the total number of new and old
You originally bought 100 T-shirts at $5.00 each. When you have 10 shirts
left in stock, you order 100 more shirts, but the price has gone up to $6.00
each. Here's how QuickBooks calculates the average cost:
The cost of your old stock is $50 (10 shirts x $5.00).
The cost of the new inventory is $600 (100 shirts x $6.00).
The combined cost of the old and new inventory is $650.
The average cost of your entire inventory is $5.91 ($650/110 shirts).
Quantity on order
For a particular item, the quantity on order is the total number of items
for which you have written purchase orders but not yet received the items.
QuickBooks automatically keeps track of this number for all the inventory items
in your Item List.
It increases when you write a purchase order for the item. For example, if
you have 30 faucets on order and then discover that you need 20 more,
QuickBooks increases the quantity on order to 50 when you write a purchase
order for the additional 20 faucets.
The quantity on order decreases when you record a bill or item receipt from a vendor for that particular item. For example, if you have 50 faucets on order and then receive 30 of them, QuickBooks decreases the quantity on order to 20 when you record the bill for the 30 faucets. Those 30 faucets are then added to the actual inventory quantity.
You can check the status of:
A single inventory item
Double-click an inventory item.
QuickBooks displays the total quantity on hand at the bottom of the window.
(Optional) If you have Advanced Inventory enabled, click the Inventory Site Info button to check the status of the inventory item at each site (Available only in Enterprise Solutions. For more information, visit www.qbes.com/inventory. Additional fees may apply).
Your entire inventory
Stock Status by Item, which lists your inventory items alphabetically by item code.
Stock Status by Vendor, which groups your inventory items by preferred vendor. This helps you reorder easily.
To see which inventory items you need to reorder, look at the Order column.
A checkmark in this column means that your stock of the item has fallen
below your reorder point. To determine whether you need to reorder, QuickBooks
takes into account the quantity you currently have on order. If the quantity on
hand plus the quantity on order is less than the reorder point, QuickBooks puts
a checkmark in the Order column.
To create a report that shows how QuickBooks calculated the average cost for a particular item, double-click
that item in the report.
If you want a hard copy of either report, click Print.
Other ways to analyze