16 Nov QuickBooks Tips & Tricks – Inventory versus Non-inventory Items
QuickBooks Tips & Tricks – Inventory versus Non-inventory Items
Inventory in QuickBooks is based on average cost. If this is an acceptable method for the business, QuickBooks can work well when set up correctly and proper procedures are followed consistently for buying, selling and adjusting the inventory item balances. With that being said, when are inventory type items appropriate and when are non-inventory type items a better alternative?
Let us start with the definition of inventory parts versus non-inventory parts. With inventory, the item is coded to an asset, a cost of goods sold, and an income type account. As the items are purchased (on the items tab of a bill, check, credit card charge, etc) the inventory balance is increased for the quantity and cost of the item on the balance sheet. Non-inventory parts, however, only have one account and both the purchases and sales are recorded to the one account. To correct this coding error, it is possible to edit the item and check the box in the middle of the item (Pro and higher only) to use the advanced job costing features. What the box says on the item is not important, what is important is that by checking the box the item now has “two sides.” One account for purchases and one for sales. With non-inventory type parts, the purchase is expensed and the sale is recorded as income. There is no matching of the timing between the two.
Items can be changed for coding corrections, or to change a non-inventory part to inventory. There is not any way to change the items from inventory to non-inventory (short of starting a new file or making the inventory items inactive). Make the corrections carefully, because it is possible that depending on what you do, all the history could change as well.
The most important aspect of using inventory is always buy it before you sell it. And never ignore warning messages if it states that you do not have enough inventory to sell.
Here”s more information on inventory versus non-inventory issues when holding goods on consignment.
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.