The following describes the basic methods for tracking inventory with QuickBooks as well as some of the benefits of doing so.
Benefits of tracking inventory with QuickBooks
- Easily keep track of the cost of goods sold.
- Easily monitor income received from the resale of inventory items.
- Can keep track of products that are assembled and then resold (finished goods), adding assembled units to inventory and deducting component units from inventory when assembled items are built. (This feature is available in QuickBooks Premier or Enterprise editions only.)
- Can quickly determine current quantities on hand, and the current value of inventory.
- Helps with the preparation of tax forms for depreciable assets.
Reconciling physical inventory
- Reconciliation is the process of ensuring that the inventory count in QuickBooks matches the actual inventory on hand.
- Inventory items represent things that are purchased, held in stock, and then sold.
- A physical inventory count is a complete count of stock on hand and a complete count of all parts remaining in inventory.
The purposes of taking physical inventory
- Businesses that are inventory based must rely on keeping detailed records. QuickBooks makes record keeping a snap.
- The IRS may require a business to produce an inventory report at year-end. (Please consult with an accountant for more information.)
- To make certain that the physical inventory and the QuickBooks inventory reconcile precisely.
- Inventory is a balance sheet item that impacts a business's net worth. Inventory losses, if any, are expenses that impact profitability and tax liability of a business. Physical inventory counting and reconciliation is an important control measure to capture those losses (or gains) and to record them properly.
When should the physical inventory be reconciled?
- Inventory is often done at year-end, but is sometimes done monthly or quarterly.
- Cycle counts are generally performed by companies with numerous items in their inventory stock, and allow for counting a different set of inventory items each week.
Where is the Physical Inventory Worksheet in QuickBooks?
- From the QuickBooks Report Center, choose Inventory, and then click Physical Inventory Worksheet.
For additional information about tracking physical inventory in QuickBooks, please refer to the following articles: