Inventory Part Items

The next step is to create the appropriate items or the inventory parts.  As the information is entered for the inventory item, the QuickBooks suggested sales price is calculated by taking the purchase price times the default mark up percentage as entered in the Sales & Customer preference.  The purchase price and selling price are simply the defaults that will be used when the items are entered onto a form.  They can be changed here at the item or at the time when items are purchased or sold.  Their purpose is to make data entry more efficient.  The amounts entered here do not affect the general ledger until the item is used and the transaction has been recorded. 

TRICK: The only exception to this general rule is if the inventory item is sold prior to ever being entered through the inventory adjustment procedures or being purchased (therefore it does not have an average cost) the cost amount will be used as the cost when the invoice or sales receipt is recorded.  Any subsequent purchases at a different rate will have the difference recorded to the cost of goods sold account at that time.

TRICK: For versions prior to 2003, if beginning balances are entered using the inventory adjust qty/value feature, be sure to check the "value adjustment" box at the bottom of the screen, even if the cost has been entered on the item.  Although the entry does not change if you do not see the actual extended item balance, for some reason, the program will change the dollar amount of this original entry if the cost on the item is changed I.e. all the historical Balance Sheets.  The "value adjustment" box locks the dollar amounts from changing.

TIP: Remember that QuickBooks uses average cost, it is important to create a new item for each inventory part with a significantly different cost.

QBRA-2002: Lists > Item List > Item > New > Type: Inventory Part

Once the first inventory part is created, you will see the software has automatically created the following accounts, if they did not already exist:

·         Inventory, type should be Other Current Asset

·         Sales, type should be Income

·         Cost of Goods Sold, type should be Cost of Goods Sold

·         Sales Tax Payable, type should be Other Current Liability

With all of these accounts, you also have the option of creating additional accounts or sub-accounts to track various categories of items in more detail on the general ledger.  It is important to consider how the information can best be used.  For example, creating items and sub-items for detail and summary reporting may be more useful than a complicated chart of accounts.

TIP: When creating a new sub-account, be sure that it matches the same type as the main account or the software will not let it be saved.

List Limits Expanded

For most QuickBooks users, the list limit for the QuickBooks Pro and Premier products of 14,500 is sufficient.  For some, however, that is not the case.  We have been seeing increased list size for a variety of reasons.  One of the most common is the increased number of customers as the result of web site sales.  For version 6 and prior, the list limit was doubled for the Enterprise Solutions Product.  New with version 7, the Enterprise Solutions limit has been removed.

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Items

Inventory