 QuickBooks Desktop 2023. Set up inventory items. Let's do it within 2-its QuickBooks Desktop 2023. Support Accounting Instruction by clicking the link below, giving you a free month membership to all of the content on our website, broken out by category, further broken out by course. Each course then organized in a logical, reasonable fashion, making it much more easy to find what you need than can be done on a YouTube page. We also include added resources such as Excel practice problems, PDF files and more like QuickBooks backup files when applicable. So once again, click the link below for a free month membership to our website and all the content on it. Here we are in QuickBooks Desktop. Get great guitar practice files. We set up in a prior presentation. Going through the setup process we do every time we open the file. Maximize on the home page to the gray area. Note that in the view dropdown we got the hide icon bar and open windows lists open. Open windows open on the left hand side. We're going to be adding inventory items at this point. Remembering that we talked about in detail in a prior presentation, the fact that the items will differ greatly and have more or less complexity depending on the type of industry we are in. Just so a quick recap, if we don't have inventory, then we're just going to have service items where we'll need them for the invoice and the sales receipts. If we have inventory, we might use a periodic inventory system in which case we're not going to track them every time we make a sale but make periodic adjustments, tying possibly to a worksheet outside of the system, or we might use a perpetual inventory system in which case we're going to be tracking the inventory both when we purchase it with say a bill up top on the purchasing side of things, not just recording the dollar amount we paid for it but also tracking the items of inventory that we need listed as assets. And then when we make the sales using an invoice and a sales receipt, those are also going to drive down the inventory as we enter that data. So to add the item, we're going to go to the lists dropdown, we're going to go to the items lists. Last time we set up the service items which are kind of like an intro into the inventory items. The inventory items having a bit more complexity as we can see if we hit the item dropdown rise up because it's going upward. We go to the new up top. We see we got the service item which is a lot more simplified because you don't have to deal with the cost of inventory versus the inventory part, which has a bit more complexity to it. So let's just tap through this and we could enter these inventory items one at a time this way, or we could try to bulk upload them, which if you're setting up a new company file is typically what you would want to do. You'd want to set up all your items at one time so that the entering of the invoices and the bills would be as easy as possible. So an inventory item, we've got the item name, we've got a sub item if applicable, the manufacturer's part number if applicable, the description for the purchase which is going to be showing on say the bill and the purchase orders, the description and then the cost. That's how much we buy the stuff for the inventory. The cost of goods sold is the expense account that will be hit when we sell the inventory using an invoice or a sales receipt. The preferred vendor is the person that we typically buy the inventory from. That's not a required field. The sales transaction description will be on the description when we create an invoice and a sales receipt. And then the sales price is how much we sell it for, which will be higher than the cost typically of course. Sales tax will mean it's subject to sales tax or not, or the tax means sales tax. So typically inventory will be subject to sales tax if it's going to the end user, possibly not if it's going from like a business to business. And then the income account that we're going to hit when we sell the inventory using an invoice or sales receipt, something like sales revenue income. The asset account down here represents the balance sheet account that's going to be going up when we buy the inventory with a bill or check and going down when we sell the inventory with a sales receipt or an invoice. The reorder point is telling us when we get down to a certain number of inventory units that it's going to remind us we need to order more. The amount on hand represents the amount of inventory we currently have on stock, the total value, how much the value of the inventory is, and the as of date, meaning the point in time that we put that in place. So I'm going to close this back out, note that, and I'm not going to save it here. We can also add the inventory as we will do this time by having an add multiple items. That's what we will do here. That's what you would typically do when you first set up the inventory. Notice also you could add the inventory parts when you actually create bills and invoices. So if I was to go over here and enter a bill for example, and I'm going to say, okay, let's do a bill. I can add the inventory item as I enter the bill. So I can say I'm going to add an inventory part right here and do it as, you know, kind of on the fly. But we want to make typically the data input forms as easy as possible, especially on the sales side, because we might have say a clerk or someone else helping us to enter that data. And of course we want them to be able to open a sales receipt. Let's say if someone came to them with a guitar, say, here's the guitar I want to buy. We want them to be able to just pick that thing and allow the system to record everything that needs to be recorded, which is a fairly complex transaction when you're talking about an invoice of inventory or a sales receipt with inventory, because it has to track the inventory, which means there's a lot more stuff going on behind the scenes, even though the data input hopefully will be quite simple to perform. Okay, so then I'm going to close this back out and say no here. Now the inventory when we first set up the company, if we're first starting the company from scratch, we would just basically want to know what our items are and be able to set up our items and think about the cost of the items and the sales price and so on. If we're changing from one company file to another, meaning I was using an accounting system outside of this company and then moving that accounting system into QuickBooks, if we have inventory items set up in another system somewhere, maybe the best thing would be to like export that to say Excel and we'll try to provide you with this Excel worksheet so that you can have it. And then if once we have it in Excel, that could help us to kind of copy and paste it into our QuickBooks system as easy as possible. Also note when we're talking about inventory, if we already have inventory on hand and we're starting the new company system and we're trying to say this is us going forward from this point in time going forward, then we're going to have a balance sheet account for inventory. So the inventory that I put on hand, I can't just debit inventory to have the balance sheet account be correct just on the number side. I have to enter the inventory parts that tie out to a cost of, in this case, $2,896 so that I can do the perpetual inventory tracking system. So as I add the inventory for the first time here in my new accounting system, I need to do it in such a way that the inventory costs tie out to that $2,896, which will then tie out to this number and then the other side of it when we record this transaction will go to like equity in some way, shape or form. So we'll see how that kind of pans out as well. Alright, so here we go. Here's a list of our inventory items. Similar strategy as with the service items, we want to basically have our headers up top trying to tie out to the headers that are going to be in QuickBooks and then we've got our data down below. So we're going to say the item name is going to be an abbreviation, in this case ELPs, we sell guitars, these are just made up guitars, we just looked up some guitars and gave a price to them, these are not actual prices. We've got the Epiphone Les Paul, the sales description that's going to show up when we put it on, when we make a sale, an invoice or sales receipt, purchase description which is going to show up when we enter the bill, the item in a bill, the cost is what we're going to purchase it for, shows up on the bill, it's also going to decrease the inventory account when we create an invoice or sales receipt by that amount. The sales price is higher, that's what we sell it for, which is going to show up on the invoice or sales receipt when we sell the item, the cost of goods sold is the expense account that will be hit when we create a sales receipt or an invoice and it's going to be hit by the cost, not the sales price, the sales account or income account is the revenue account that's going to be hit when we make a sales receipt or an invoice, it'll be hit by the 500 which will be seen on the invoice whereas the cost will not be seen on the invoice because it will be provided to the customer. Inventory account represents the account that will be increased when we enter a bill or check to purchase inventory and decreased when we enter a sales receipt or invoice. This is the quantity that we currently have on hand of each of these units, they're all going to be subject to tax when we sell them and as of, we're going to put them in place as of the last day of the prior period, 12-31-22 so that everything should wash out to retained earnings and be ready to go as of the first date of the current year we're operating in, in this case January 1st, 2020, wait a second, yeah, we'll do it January 1st, 2022 so we're kind of working in the future a little bit here but that's how we'll do it, here we go meaning as of the time of the recording it's 2022 but we're going to be doing this as if we're starting the new company file in January 2023 going forward. Okay, so now I'm going to go back to QuickBooks and try to set up my data input so I can just copy and paste that over so I'm going to go to the item drop down, rise up and go to the, I'm going to say we want to add multiple items just like we did before but this time not service items we want the inventory, so I'm going to hit the inventory parts and active, we want the active items of course and then I need to customize the headers to put them in the same order so I'm going to customize up top and so the amounts that have been chosen are on this side the ones not chosen over here, so we got the item name that's necessary, sub item, we don't have any sub items I'm going to remove that by going to remove the cost we're going to need that, the sales price that's going to be the amount we sell for cost a good sold account preferred vendor, I don't think we have a preferred vendor we could add that but no, I'm going to remove that the income account, asset account, reorder point I didn't add a reorder point, so I'm going to remove that the max, I'm going to remove that and then the total value, the sales price the total value, I don't think I added the total value sales tax and then the manufacturer's part number we don't have one of those, quantity on hand so let's tie this out, so I'm going to say okay we've got the item name, so item name is first then we've got the sales description and then the purchase description so notice here's the purchase description, I need to add that let's pull that over here and then the sales description, let's add that over so I'm going to move the sales description up by saying up, up, up, up, up, so that's number two this is going to have a vertical order in the same way as the horizontal order it's going to show up this way, it's a little confusing until you kind of get used to it, up, up, up, up and then it's totally not that bad, so we got item, item purchase description will be purchase description or sales description will be sale and then purchase description you see how it's working here, alright and then we're going to say then what's next, cost, sales price so I'm going to say alright then the cost, sales price cost to goods sold, that looks good I've got the income account and the asset, so then I've got the income account asset account, that looks good income account, asset account, quantity on hand quantity on hand, I'm going to bring that up one, move up move it up and then quantity on hand sales tax code, sales tax code and as of date, I want to have the as of date and I think that's all we need, so we don't have the full name, manufacturer, preferred vendor rearer point, total value we might need that but I'm going to keep that here average cost, so let's keep that as is I'm going to say okay and then hopefully I lined them up so I can just copy and paste now as if QuickBooks was like Excel I could just copy this stuff, just go boom copy, control C and then just put that right there and control V, control V or right click in V or whatever you want, however you want to paste, whatever you want to do so there we got it, so now we got the item the sales description looks good purchase description, that's what we bought it for, that's what we sell it for cost to goods sold account, sales is the income account and we do have a sales account, because that was set up in our chart of accounts, if you have a sales account that was not set up just like with the we have the issue with the inventory, so they're saying we don't have an inventory account here so let me check my chart of accounts, go to the list dropdown chart of accounts, what do you mean I don't have inventory because they called it inventory asset instead of inventory, it's like okay whatever we probably should have looked that up before we copied and pasted it but I'll just change these and say okay fine inventory asset, you know what I meant quick books, so now I got to go in and change all these and it's going to warn me every time, I know that's what I'm trying to change quick books, don't give me the don't give me the message anymore, I hear you don't you see, I'm changing all of them, I'm changing all of them now so we're going to change them all to inventory asset okay, okay so there we have that, quantity on hand sales tax code, they're all taxable notice that generally if you're selling to the end user they might be subject to sales tax right, but you might have certain customers that might not be subject to sales tax so this is usually the driving component to be subject to sales tax remember the sales tax item we talked about in the preferences, you got to go to the edit dropdown to turn on the sales tax, so in this we turned on the inventory to do this, so inventory is on, so now we have inventory parts and then we added our sales tax which will differ in the United States by where you are located so we're subject to the sales tax and we would then have to think about the customer with regards to sales tax if there are any customers that would not be subject to sales tax even though in general the item would be subject to sales tax, we won't talk about that yet we might go over that later, and then the as of date is at the end of the last year because we're going to be answering our data as of January 1st, 2023 okay let's save the changes and see if it gives me any problems, six inventory items have been saved, no problems does it look like it's given me, let's go to my item list which you could find item dropdown, item list, so now we've got our service items and our inventory parts so if I double click, or if I right click and I wanted to edit this one, then I can see it in this view, so now at the same field just in a different view there's the name, here's the description that's going to show up on when I make a bill or purchase order, cost there's the cost of good sold account, preferred vendor we didn't put one but it should be epiphone you would think and then the sales price, tax, code, income it goes to the income account and then it's going to be inventory account down here, minimum reorder point we've got one on hand, so we put that beginning balance the fact that we put one on hand at an average cost of 400 that's going to now make a journal entry into our accounting system, so you might say well how is QuickBooks going to do that because I didn't tell it what's the other side of the journal entry, meaning now I just told QuickBooks that I have inventory hopefully worth 2896 which is represented I could do my little calculation here right I could say well what's it going to be it's going to be what I cost of my inventory times how many units I have on hand I can copy that down and say if I sum that up then I've got inventory that should show up on the balance sheet for 2896 and I should have a sub ledger breaking out each unit of inventory that I have by epiphone les paul epiphone standard pro epiphone Riviera and so on and so forth ok so let's check it out then so let's go to our reports now reports drop down company and financial let's take a look at the balance sheet standard and let's customize up top and let's say that we're going to say this is for well I got to make the range in the next year 010123 to 123123 and then run it so there we have it let's customize it again fonts and numbers and up the font size to 12 so you can see it more better she wants you to be able to see it more better so down here put the other side into opening balance equity what is that that's not even a thing like and so that's what QuickBooks does right it puts it into some equity account so if I do that every time with every account that we add the other side's going to be dumped into some equity account possibly opening balance equity which isn't like a real account you don't want you don't want to keep it in opening balance equity in my opinion because it looks ugly because you know there's no such account so it's a it's a clear account but but the fact that it's going to clear out to equity means the total equity will be correct and then we'll go in there and we'll fix the equity account which if it's just a sole proprietor account we'll just have one equity account which could be called capital equity whatever you want to call it if it's a partnership then you got to break it out to the partnership accounts two or more partners which is in accordance with the partnership agreement and their capital balances and that gets confusing if it's a corporation then it would be broken out into basically retained earnings which then everybody knows the value because they have equal shares because you broke it out into equal shares so it's actually a little bit easier you also might have you know the agreement of the capital stock but there it is so there is that so then we should have the now if I double click on this and drill down on it you could see we could see what it does here let's change the date from 0101 to 2 and so now it entered all these transactions as inventory adjustments that's weird why did it enter them like that because that's the form that QuickBooks is going to try to default to whenever there's an adjustment to inventory because usually inventory is going to be hit right inventory is going to have an impact on inventory when you enter a bill to purchase inventory or when you make a sale with an invoice or a sales receipt or you can basically adjust the inventory if you had a periodic adjustment possibly at the end of the period you made a physical count that differs from from what's in the system so QuickBooks is always going to use a form whenever it can right so so you would think it might have used a bill form here but it can't really use a bill form because we didn't assign a vendor to it so it used of an adjustment here as an if you have an accounting background you might just say well why didn't it just enter a journal entry why didn't it just go boom company drop down journal entry why doesn't it use that as the form remember that the journal entry is the last form that QuickBooks will always used if there is a form that is designed for the standard process of data input that's the form that will be used even if we don't do the data input in that format we just put a balance into the system and it used the best form that it could and if it couldn't find a form that's when it would use basically just a journal entry that helps QuickBooks to then be able to adjust the sub ledger accounts as well because these forms are designed to link together the journal entry to the sub ledgers so if I go so now if I if I go into this transaction detail if I go into one of these there's what the form looks like so it looks totally different than what we did the data input in because we just added the item and told it that it had a beginning balance in it okay so that's weird but hopefully that makes some sense and so then we we should have an inventory report reports drop down inventory reports so now we got the inventory valuation summary let's say let's make it as of twelve thirty one two four and so there we have now we've got our quantity on hand let's make it a little bit larger and we'll make it twelve on the font yes okay so now it's tracking on a perpetual inventory system we got our beginning balances in place which ties out to the two thousand eight ninety six that ties out to what our beginning balance was here so that looks good that ties out to what's on the balance sheet that looks good so far and then we've got each of our units we've got our ukulele we've got our epiphone less Paul and so on the unit by unit of the inventory that we need we have then the the average cost because it's using a flow assumption of a weighted average you know you got five full life full weighted average specific identification we're using weighted average here so then the asset value and then the percentage of the total and this is what we're going to sell them for so this is what's going to actually show up on the invoice or sales receipts when we sell them so then if I go to the home page just to kind of hopefully drive this home if I was to go into like a bill and enter an item and say we've got we've got some kind of item here there it's going to put the quantity it's not going to put the quantity it's going to put the name of the item sales description the cost this is what we're going to purchase them for and so on helping us to populate the purchase of them and then if I was to sell them this and this by the way would increase the accounts payable it would increase the inventory by four hundred and forty if we bought one of them and it would increase the sub ledger by the epiphone Riviera in this case and so I'm going to close this out close this out no and then when we make a sale on the invoice side of things we can choose some inventory part or some and this then would and it if I if I have to add a customer so the sales tax would be turned on here so let's just say customer one I'll add a customer customer one tab quick add so now the sales tax is calculated because it needs to have a customer to calculate the sales tax but now this is actually a fairly complex entry that can be done quite easily if someone came up to the register or someone called in and said I want to order you know by by this or whatever someone can fill this out quite easily and just okay yeah one epiphone less Paul they enter it into the system but the actual journal entries fairly complex because now you've got an invoice increase in the accounts receivable by the amount that we charged plus the sales tax because we had to calculate the sales tax because we're subject to that so there's the 525 AR going up by the other sides going to the revenue account which is determined by the item which would be the sales account but it's only going to be going up by the 500 because it's subject to the sales tax and that's what we charged the payable account that's going to go to the sales tax payable is going to go up by 25 then there's also going to be a decrease to the inventory in terms of the of the ledger inventory account by I think 400 which isn't actually on the invoice but the system knows about it because the item knows about it and the cost to good sold expense will go up by that 400 as well plus the sub ledger will be impacted on a perpetual inventory system decreasing the units of the guitars the sub ledger totals then tying out to what's on the balance sheet so a lot is going on when you do the simple data input of an invoice especially if you have inventory related to it okay so I'm going to close that out I'm not going to record it I'm going to say no and so that's the general idea notice there's no impact on the income statement reports drop down company financial profit and loss from 0101 222 to 1231 222 nothing's happening even if something did happen to the income statement it wouldn't matter because we entered it as of 2022 and the income statement will roll over into the balance sheet so as I enter these beginning balances sometimes quick books might enter something into an income statement perhaps when I make the accounts receivable it uses an invoice which goes to sales enters an income statement amount I'm not worried about that because I'm entering the data in the prior period which will then roll into the income statement will roll into the balance sheet in the equity section the income statement for this time frame that we want to work into this quick book system on starting January 1st 2023 will not be impacted we'll see that in future presentations it'll be great