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Set up inventory for the first time

This task requires a series of three steps:

  1. Turn inventory tracking on and set inventory preferences.

    To do this task

    Only the QuickBooks Administrator can do this task.

    1. Open the items and inventory preferences.

      To do this task

      1. Go to the Edit menu and click Preferences.

      2. In the list at the left of the Preferences window, click Items & Inventory.

      3. In the list at the left of the Preferences window, click Items & Stock.

      4. Click the Company Preferences tab.

    2. On the Company Preferences tab, select the Inventory and purchase orders are active checkbox.

    3. Click OK.

    The next step in using inventory tracking is setting up the inventory accounts you need.

  2. Set up the inventory accounts you need.

    To do this task

    1. Turn on inventory tracking, if you have not yet done so.

      To do this task

      Only the QuickBooks Administrator can do this task.

      1. Open the items and inventory preferences.

        To do this task

        1. Go to the Edit menu and click Preferences.

        2. In the list at the left of the Preferences window, click Items & Inventory.

        3. In the list at the left of the Preferences window, click Items & Stock.

        4. Click the Company Preferences tab.

      2. On the Company Preferences tab, select the Inventory and purchase orders are active checkbox.

      3. Click OK.

      The next step in using inventory tracking is setting up the inventory accounts you need.

    2. 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.

        Check to see if the Sales Income account exists

        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.

    3. The next step in using inventory tracking is adding the inventory part items to your item list.

  3. 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 card)

    • 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.

    To do this task

    1. Turn on inventory tracking, if you have not yet done so.

      To do this task

      Only the QuickBooks Administrator can do this task.

      1. Open the items and inventory preferences.

        To do this task

        1. Go to the Edit menu and click Preferences.

        2. In the list at the left of the Preferences window, click Items & Inventory.

        3. In the list at the left of the Preferences window, click Items & Stock.

        4. Click the Company Preferences tab.

      2. On the Company Preferences tab, select the Inventory and purchase orders are active checkbox.

      3. Click OK.

      The next step in using inventory tracking is setting up the inventory accounts you need.

    2. Set up the accounts you need, if you have not already done so.

      To do this task

      1. Turn on inventory tracking, if you have not yet done so.

        To do this task

        Only the QuickBooks Administrator can do this task.

        1. Open the items and inventory preferences.

          To do this task

          1. Go to the Edit menu and click Preferences.

          2. In the list at the left of the Preferences window, click Items & Inventory.

          3. In the list at the left of the Preferences window, click Items & Stock.

          4. Click the Company Preferences tab.

        2. On the Company Preferences tab, select the Inventory and purchase orders are active checkbox.

        3. Click OK.

        The next step in using inventory tracking is setting up the inventory accounts you need.

      2. 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.

          Check to see if the Sales Income account exists

          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.

      3. The next step in using inventory tracking is adding the inventory part items to your item list.

    3. Click Home.

    4. In the Company section, click Items & Services. Shortcut

    5. Click Item at the bottom of the list and click New.

    6. 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.

      To do this task

      Only the QuickBooks Administrator can do this task.

      1. Open the items and inventory preferences.

        To do this task

        1. Go to the Edit menu and click Preferences.

        2. In the list at the left of the Preferences window, click Items & Inventory.

        3. In the list at the left of the Preferences window, click Items & Stock.

        4. Click the Company Preferences tab.

      2. On the Company Preferences tab, select the Inventory and purchase orders are active checkbox.

      3. Click OK.

      The next step in using inventory tracking is setting up the inventory accounts you need.

    7. 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.

    8. 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.

      To do this task

      1. 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 item.

      2. 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.

    9. (Optional) If you know it, enter the manufacturer's part number.

    10. (Optional) If unit of measure is available, assign a unit of measure.

      To do this task

      1. 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).

          Base unit

          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.

          Related 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.

          Unit of measure set

          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.

          or

        • 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.

    11. Fill in the Purchase Information fields. More...

      To do this task

      1. (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.

      2. (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.

      3. The Cost of Goods Sold account is preselected in the COGS Account field. You can choose a different account if you want to.

      4. (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.

    12. Fill in the Sales Information fields. More...

      To do this task

      1. (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.

      2. 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.

      3. 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.

      4. Click the Income Account drop-down list and choose the account where you want income from the sale of this item recorded.

    13. Fill in the Inventory Information fields. More...

      To do this task

      1. 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.

      2. (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.

      3. (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.

      4. If you already have some of this item in inventory, enter the quantity in the On Hand field. Otherwise, leave the quantity at zero.

      5. 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.

      6. 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.

        How can I tell when the item was last used in a transaction?
        1. Click Home.

        2. In the Company section, click Items & Services. Shortcut

        3. Click anywhere in the line containing the item.

        4. Click Reports at the bottom of the Item List window and click QuickReport.

        5. Scan the report for the latest transaction date.

    14. (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.

    15. (Optional) Click Custom Fields to fill in or define custom fields for this item.

    16. Click OK to record the item, or click Next to record the item and start creating another.

    See also

See also

KB ID# H_INVTRY_SET_UP_INVTRY
8/27/2014 5:51:05 AM
PPRDQSSWS400 9102 Pro 2013 660791