Inventory items are recorded as assets in the accounts. These items are usually finished products sold by your company. Since inventory turnover represents one of the most important stats for a business, tracking inventory becomes a priority for many of them. In this article, you’ll learn how to enter inventory in QuickBooks Desktop and Online.
- 1 Enter Inventory in QuickBooks Desktop
- 2 How to Enter Inventory Purchases in QuickBooks?
- 3 How to Enter Inventory in QuickBooks Online?
Enter Inventory in QuickBooks Desktop
All versions of QuickBooks desktop contain the required features for inventory management, but they differ in the method of managing the inventory. While the Pro version uses the average cost method, the Premium and Enterprise versions use the FIFO and LIFO methods to track inventory.
To enable inventory management in QuickBooks Desktop, follow the steps provided below:
- From the main menu, click on Edit.
- Click on Preferences.
- Go to the left panel and select Items and Inventory.
- Enable the option ‘Inventory and Purchase Orders are Active’.
- Click on Ok.
Must Read: How to Add Inventory in QuickBooks Desktop?
To enter an inventory item in QuickBooks, follow the steps provided below:
- Go to the home screen and select Items and Services.
- Hit the Item button. Click on New.
- Select Inventory Parts and enter the Name/Number for the product.
- Click on Income Account. Select the appropriate account for tracking the item.
- Enter the rest of the details for the item.
- Hit Ok.
You’ve created your first item in QuickBooks desktop. Whenever you create a bill, check, or expense, you can select the item to update its count. You can also enable low stock alerts if the item is vital for your business.
How to Enter Inventory Purchases in QuickBooks?
In QuickBooks, you can either enter inventory purchases through bills or purchase orders. You can easily enter inventory purchases in QuickBooks by going to the items tab.
If you’re going to pay for the items right away, then you can simply add a check for the same. To do so, follow the steps provided below:
- Create a New Check.
- Select the Item from the dropdown list.
- Enter Quantity of the item purchased.
- Select a vendor from Pay to the Order of dropdown menu.
- Click on Save and Close.
Now you can find the purchase of the product from the item list. However, recording a prepaid inventory creates problems in your balance sheet. Since you haven’t actually received the items, you don’t want them to appear in your books. To solve this issue, you can create an inventory prepaid account by following the steps provided below:
- Go to the Chart of Accounts.
- Double Click on Inventory Prepaid.
- Select the Supplier.
- Enter Date of purchase.
- Enter amount for purchase.
- Click on Save and Close.
Now, instead of updating the inventory, the purchase is saved separately into the inventory prepaid account. When you receive the items, you should create a bill for them. Then create another bill and credit it from the inventory prepaid account. By doing so, you’ve balanced your inventory prepaid account and the balance sheet.
How to Enter Inventory in QuickBooks Online?
Inventory contains a list of items bought and sold by a company. In QuickBooks, users can enter inventory items and data related to them. Once the inventory is set up and items entered, users can track the items and add them to the sales list directly through QB.
There are several product and service types in QuickBooks. You need to be familiar with them in order to select the right type to track the inventory properly. Below, you’ll find information of the types of products and services:
- Inventory – Products sold by your company. You can track them and add them to the sales forms if you’ve the Plus or Advanced plan for QuickBooks online.
- Non-Inventory – Products sold by your company which don’t need to be tracked.
- Services – Services provided by your company.
- Bundle – A bundle of products or services sold as a single item to the customer.
In QuickBooks, you can only track inventory items. To track any other item type, you need to convert it to an inventory item.
Check Subscription Plan for Inventory Management
By default, the option to track inventory items is disabled in QuickBooks Online. Before you start, make sure that you have an active subscription for inventory management. Inventory management isn’t available under all plans in QuickBooks.
To check if you have inventory management in your plan of QuickBooks, follow the steps provided below:
- Click on the Gear Icon.
- Select Account and Settings.
- Click on Billing and Subscription.
- View your plan. You must have QuickBooks Plus or above to manage inventory through QuickBooks.
Switch on Inventory Tracking
To start tracking inventory in QuickBooks online, follow the steps provided below:
- From Settings, click on Account and Settings.
- Click on Sales.
- In the Products and Services section, click on Edit.
- Switch on
- Show Product/Service column in sales forms.
- Track Quantity and price/rate
- Track inventory quantity on hand.
- Click on Save
- Hit Done.
QuickBooks uses the first in, first out method to track inventory. The FIFO method assumes that the items or assets purchased first are disposed of or sold first. This isn’t true of all accounting software.
Enter Product Details
After switching on tracking for inventory, you can start adding items to QuickBooks. For each item, you must enter the SKU, category, and product’s name. Also, if you’re keeping track of your inventory items through excel, then you can import that data into QB.
SKU, Category, and Product Name
To enter item details into QuickBooks online, follow the steps provided below:
- Click on Sales from the main menu.
- Select Products and Services.
- Hit New/Add a product or service.
- Click on Inventory.
- Input SKU, Name, or HSN code for the item you wish to track.
- Enter unit from the Unit dropdown menu.
- If you wish to organize your data in categories, then select a category from the category downtown menu.
Quantity, Stock Alert, and Asset Account for Inventory
To add an asset account for inventory, low stock alert, and product quantity, follow the steps provided below:
- Add Initial quantity on hand for the product.
- In the As of date field, enter the date on which you started tracking the inventory item.
- To know if you’re running out of a particular item, add a Low stock alert.
- Click on the Inventory Asset Account dropdown menu.
- Select Inventory Asset.
The inventory asset account is used for tracking the cost of each item in the stock. These accounts hold the complete inventory value and its breakdown.
Tax, Purchasing Info, and Sales
To add tax, purchasing info, and sales for your products, follows the steps provided below:
- On the Sales form, you can add a description of your product. Product descriptions are displayed on the invoice and can be used for providing additional details to customers.
- Enter the Sales price/rate.
- From the Income Account dropdown, select the account used for tracking inventory. You can even add a new account at this point.
- If application, mark the option for Inclusive of tax.
- Click on the Tax Dropdown menu.
- Choose a tax rate applicable on the item. In case tax isn’t displayed, then you haven’t set up a sales tax in QuickBooks.
- On the purchase forms, add a description for the product. This description is displayed on bills sent by you through QuickBooks.
- Enter Product’s Cost.
- Click on the Expense account dropdown menu.
- Select Cost of Sales, an account used for tracking the cost of product sold by a company.
- If applicable, mark the option Inclusive of purchase tax.
- Click on the purchase tax dropdown menu. Select the applicable tax for the product.
- Enter Reverse Charge for the product.
- You can also select a preferred supplier for the product. This supplier will be saved in QuickBooks, enabling you to reorder the product from him or her again.
- Hit Save and Close.
To know more, or for any help with Inventory management in QuickBooks, get in touch with our experts.