 QuickBooks Online 2023. Set up inventory items. Get ready to start moving on up with QuickBooks Online 2023. Here we are in our Geek Rake Guitars practice file. We started up in a prior presentation using the 30 day free trial. We also have open the Free QuickBooks Online test drive sample company. If you want these to open at the same time, I suggest using the incognito mode or another browser. You can open the incognito mode if using Google Chrome with the three dots and then new incognito window and then search for QuickBooks Online test drive. We will be using the test drive to be comparing and contrasting the business and accounting view. Get great guitars being in the accounting view, the sample company in the business view. If you wanna change between the two views, you can go to the cog dropdown and switch between the accounting and business view here. In prior presentations, we set up the company file. We looked at some of the preferences in the cog dropdown. We looked at the general ledger provided to us by Intuit. Now we're entering our beginning balances. 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. So we are imagining we had another accounting system prior to starting QuickBooks online that and these are the beginning balances from that system. Now we're gonna go into each of these, add them one at a time. The other side is gonna go to some kind of equity account and then we'll adjust the equity accounts after we have entered them all. I'm gonna start with some of the more complex items and that's gonna be the inventory asset probably the most complex item if we're tracking inventory. So we've got the 2008, 96 here. Now you would think if I'm gonna put that into the QuickBooks system that all I would have to do is like a journal entry. So if you know accounting in terms of journal entries you'd probably say I'm just gonna hit the plus button enter a journal entry and I'll just increase with a debit the inventory account but I can't do it simply that way if I'm tracking inventory in the system on a perpetual inventory system. In other words, I want QuickBooks not only to track the dollar amount but also the number of units that we have on hand. Therefore, we're gonna have to enter the inventory items. So that is located under the sales tab which you might see the customer center you might call it and then products and services at the bottom. If you're in the business view it would be on the get paid and pay tab and then product and services. And so these are the things that we actually sell in a prior presentation. We kind of practice with this by setting up service items. Now we're gonna set up the inventory items. Now as we enter the inventory items if we put a beginning balance into the system QuickBooks will then record a transaction for the cost of those inventory items. So in other words, if I hit the plus button up top we put the service items in last time. If you look at the service items they're a lot less detailed in terms of the data input. If I look at the inventory items closing that out new inventory item, let's just go through it here. We've got the name, we've got a number if applicable a category meaning we might have multiple inventory items that are in a certain group we might sell guitars versus bases versus drum sets and group them in those categories having various different ones in the category. We can have a picture of it which actually could be quite useful if you have different people doing the data input so they can see what is being purchased. You've got the initial quantity on hand which would only be used when you're first setting up the file as we are doing here. So we're gonna be using that as of date. So this is gonna be the date that they're gonna enter a transaction for that initial quantity. The reorder point that's gonna be if we get low we're gonna reorder at that point in time. Then we've got the inventory asset. The inventory asset is the account that's gonna be increasing when we buy the inventory decreasing when we sell the inventory. Description is gonna show up in the sales forms that being the sales receipts and the invoices sales price what we sell them for that the income account that will be impacted when we sell the items. Notice these two accounts seem somewhat redundant to me sales and sales of products. So I would probably go and make one of those inactive and use the other one. And then we've got the purchase information. That's gonna be what's on the description form on the purchasing side of the inventory when we buy with a bill, a check, an expense form or either of those. And this is the cost what we pay for them as opposed to what we sell them for cost of goods sold is the expense account that we expense when we sell the inventory. In other words, when we sell the inventory we have a revenue account increasing and we also have an expense account the cost of us consuming the inventory in order to generate the revenue that's cost of goods sold and a preferred vendor if there's a vendor that is specific to this inventory account. Now notice usually oftentimes we will have sales tax in the United States which will be dependent on the locality of the business. It'll be a state and local in other words instead of a federal tax. That can be found on the left hand side under taxes here. And so we'll deal with sales tax later. By the way, on the business view there's also a taxes tab. So you all notice that if you're gonna add a whole lot of items you might wanna set up the taxes first so then you can have another line item which will apply to whether something is taxable or not because with the sales tax the thing that drives whether the sales tax is gonna be applied or not is primarily the item. We have to say to the item whether it's taxable or not. So therefore we'd have to set this up and then we'll have that option. So we'll do that a little bit reversed. We'll enter the items and then I'll go back in and we'll set up the sales tax and then apply the sales tax to the items that we have set up. So let's go back on over to the sales on the left hand side. So if I was to enter these we could enter them one by one that way or we can import them which is what we might want to do as we're starting a new company file if we have a bunch of items that we got say from our prior accounting system. And so let's go on over this is what our items are gonna look like. So I'm gonna imagine we got this or put this together from our prior accounting system we've got an item name, the sales description purchase description cost sales price cost a good sold income account asset account quantity on hand sales tax and as of date. So these should mirror basically the data input forms we saw when trying to enter them one at a time. So what I'm gonna do now is say okay I'd like to import this let's pull this over here and I'm gonna say let's go to the import options same process we did before except now we have inventory items so we're gonna need more stuff the required fields include if you're importing inventory we need the product name product type quantity as of date those are the minimum that you need. I'm gonna download their file and I'm gonna try to use their headers again so that we line up exactly with their headers to my headers and I'll do that enabling editing by trying to line up their headers up top to exactly what I have and then I'll just copy and paste my data into their Excel worksheet so that I can use their formatting for it so it should work as cleanly as we can get it to work. So I'm gonna remove this I'm gonna put my cursor on the nine right click and delete it and then see if I can just mirror this to what I have so I'm gonna say okay what do I have over here I've got an item name and they've got let's see if I could put this kind of side by side put this side by side like that and so I'll say the item name is gonna be the product and service name notice I have a short name here which you might call the number the SKU but I'll keep that as the name that I think will show up on the dropdown if I keep it here and then you've got the sales description so what I'll do is I'll say let's take this I'm gonna copy that under the product name and then the sales and purchase descriptions are the same so these are the names, these are guitars I might not spell them right or whatever so bear with me that these are gonna be the types of guitars and EpiphoneLessPaul Epiphone Standard Pro and so on so I'm gonna paste that here and then we've got the SKU I'm not gonna use so I'm gonna put my cursor on column C and delete that just gonna delete it and then the type it's gonna be an inventory item so I'm just gonna copy the inventory item and I'll paste that on all of them that's gonna be inventory versus a service item for example the sales price so the sales price I had right here that's this column so I'm just gonna copy my numbers for the sales price and put that here that's how much we're gonna sell per unit and then the income account the income account is so now I can look up the income account and notice I wanna kinda use the default income account that QuickBooks wants to use so if I close this out for a second and I hit the dropdown or if I hit new inventory you can see that it wants to use that sale of product income so I'm gonna use that just to note where that is if I go to the if I didn't like that account I could then go to the item here we can go into our accounting and go into the chart of accounts and then scroll down and say okay where's my inventory accounts they're down my income accounts they're down here and they're using that sales of product so sales of product so notice that this one seems somewhat redundant so maybe I don't want sales up here otherwise I might get confused between the two so I'm gonna make this one inactive by going to the left and say make inactive and so now I shouldn't get confused between the two hopefully and if I scroll back down we've got the income account sales of product income so then I'm gonna copy that and go back on over here and say okay let's do that one sales of income so copy that and paste that and then the purchase description is gonna be the same so here's our purchase description these are just gonna be the name of the guitar this is what's gonna be populating on the when we buy forms bills, checks or expense forms the purchase cost what we buy them for I'm gonna say is this so we buy them for less than we sell them for obviously because that's how we're gonna make money and notice these are not accurate prices I'm just kind of making up numbers here and then the expense the expense account is cost of goods sold so cost of goods sold and then the quantity on hand the quantity on hand I'm gonna say is here so this is how many guitars I currently have in inventory by item and so this is the thing that's actually gonna enter transaction into the system and then the reorder point I'm not gonna put a reorder point so I'm gonna try to delete it or maybe I'll just put zero when it gets to zero because I think that's a required field maybe and then we've got the inventory asset account which I believe is just inventory but let's double check it over here if I scroll back up top I think we have an inventory account so it's just in so now again they have two of them they've got inventory and inventory asset those two look redundant to me I don't wanna get confused between the two I don't know why they add two like that so what I'm gonna do is I'm gonna hit the plus button and go down to my down to my sales tab and see what the default is when I make a new inventory item and I'm gonna say where do they like put in the inventory they wanna put it into inventory asset okay so I'm gonna copy inventory asset I'm gonna put that over here so inventory asset and that needs to be copied down and I'm gonna get rid of that other inventory account because I don't want two accounts again that are gonna confuse things so I'm gonna close this I'm gonna go back to my chart of accounts accounting and then my chart of accounts by the way under the business view that chart of accounts is under bookkeeping and then you've got your chart of accounts right here if you wanna check that out see the chart of accounts okay so then I'm gonna go okay this inventory I'm gonna make that one inactive I don't need two inventory accounts that's gonna confuse things so make that one inactive why do you have redundancies in the accounts for goodness gracious are you trying to confuse me QuickBooks are you trying to mess things up whatever so there we have it and then the reorder point is gonna be as of the end of the prior period because I'm gonna start all of the new data January and January so I'm gonna paste that so there we have it now now once I enter this what's it gonna do it's gonna take I'm gonna put a little formula over here you don't need to do this but just to see what's gonna happen what I hope happens we're gonna say the cost not the sales price so I'm taking not the sales price but the cost times the number of units on hand and I'm gonna copy that formula down and then sum it up sum it up and that's gonna be the 2896 that should tie out to what we have here so right that's the journal entry that it's gonna do and it's gonna give us the sub ledger recording each of these units of inventory that's gonna increase inventory the other side's gonna have to go somewhere which I'm assuming they're gonna post to opening balance equity so let's do it let's close it let's delete this let's save this I'm gonna say file save as so I can import it I'm gonna go to my desktop because that's where I hold all my stuff so I can get to it right on top of my desk I'm gonna say this is gonna be the get great guitars and this is gonna be my inventory items boom okay I'll say continue it I think it's trying to update from a really old Excel sheet and we're gonna say okay so now let's import it so I'm gonna go boom import just like we did last time now that I've got these let's see if it works out I think it will I'm hoping I'm hopeful desktop we're gonna go into the QuickBooks online and the get great guitars inventory items that's the one so we have an Excel sheet or CSV works so that should work next so now it's mapping the mapping should this is giving us the line item within the system QuickBooks this is the headers of our Excel form they should tie it exactly because we took the time to change the headers to match exactly what's in the system if they're not exactly matching then you can just line up the header to what is in the system as best you can so the type matches exactly the sales description matches sales price matches of course that found this field it found this field these are matching the headers so that looks good quantity reorder everything is checked off we don't have sales tax because I haven't turned on sales tax yet we'll do that next time so that'll be a little bit more of a burdensome to do but I think it'll help us to see how sales tax works so now it's we're gonna sell them we are gonna buy them we're gonna track them meaning we're tracking the units of inventory this is the name which I kind of put the number here on it but this is what's gonna drop down when I do the drop down so I'm gonna keep this kind of abbreviation over here which might more appropriately be in the SKU but we'll keep that there the type the type is inventory as opposed to a service item so the sales description this is the name notice that you can make these wider so you can see what is going on here a little bit better if you want seeing stuff is nice and then the sales price here the income account that's gonna be the sale of products that's the income account the purchase description same as the sales description that's what shows up on the bills expense form check forms the purchase cost this is what we buy them for as opposed to sell them for and that's what's gonna be used to put it on the books as an inventory asset cost to good sold is the expense account when we sell them the quantity that we have on hand at this point per unit and the reorder point I'm just put zero and then the inventory account that's the inventory account there's just one of them now because I made that other weird one that they had two of them inactive and then the quantity on hand as of date which is important because I don't want to have a journal entry in the system in the middle of the year I'd have I like to have it at the end of the last year so that it doesn't mess anything up in the current year the other side therefore should go to an equity account when we record it one way or the other either it goes to the income statement and then to equity or it goes to opening balance equity directly we'll see that in a second let's import it and see what it does it says six to six products and service successfully imported woohoo I thought no problems what so I was a little worried not really I knew it would work but any case here's your items down below so we've got the inventory items now we've got the quantity on hand you can see the difference between your inventory and service items because the service items don't have any quantity and whatnot or cost you can also sort by item if you so choose so this way you can kind of see the inventory service items first and then the inventory items or the other way if you wanted to see the inventory items on top so that looks good now now that I have these on on hand a transaction must have taken place on the financial statements so what I'm going to do is I'm going to right click on the tab up top and duplicate it and I'm going to right click on the tab again and duplicate it again opening up our major two financial statements in these two tabs the balance sheet and the income statement which have now started to be constructed at least the balance sheet has so I'm going to go then to the left tab we're going to go then to our reports on the left and then the balance sheet reports if you're under the business view by the way the reports are in the business overview and then the reports so you can find the reports there if you're if you're following along in the business view and so then we can see in here that we have I'm going to adjust the date up top from 0101 well we could do it as of 1231 222 1231 222 at the end of 2022 there's our transaction now notice I entered a transaction of that $4 I'm going to remove that because this should be our first transaction here so you shouldn't have anything in except for this two eight nine four so obviously the inventory account went up the other side went into retained earnings I mean it went into opening balance equity so I'm going to zoom in on that so if I click on it you can see what it did here it created the form using inventory starting value so it kind of created a form this isn't a form we use all the time but it's still made like a form so QuickBooks records transactions trying to find the related form so they've got this form it didn't just use a journal entry in other words so remember when we enter information into the system if I hit the plus button we pick a form that is applicable if there is no form applicable only then do we typically use a journal entry even if you're doing something kind of unusual like entering beginning balances into the system QuickBooks will still look for the appropriate form and then before defaulting to a journal entry so you've got your forms here and they enter them into the system notice the split went to the other side they put it to opening balance equity so if I close this back out by going back to the report and down to opening balance equity there's the other side of the transaction so it didn't record anything to the income statement which is fine it put it into this account right here which we're gonna have to adjust for because we don't want something in opening balance equity we're gonna put it into an owner's equity because it's an owner account and probably change the name from retained earnings which sounds like a corporation account to owner's equity or something like that which would be appropriate for a sole proprietor we'll deal with that later the point is we're in balance the other side went to equity somehow and that's good if I do that for every account here then equity as a total should come out to $77,896 after we're done even though it'll be distributed in retained earnings opening balance equity and possibly income which we'll then have to adjust into the proper account at that point now if I go to the tab to the right just notify go to the reports on the left hand side again and go into the profit and loss and I'm gonna go from 010123 to 123123 well let's go well I can do that let's do that there shouldn't be I'm actually gonna delete this transaction cause I think I recorded this by accident just to give a demonstration of an invoice so I'm gonna go into this transaction and if you have this in there I don't know how exactly I did this I'm gonna delete it so you could go in here and just delete the transaction be careful deleting transactions but we'll do that so get that invoice out of there and then back so we don't have anything in the profit and loss is what I'm trying to point out in the current year or in the prior year 2022 to 123122 so remember we want if there was something in 2022 year in the income statement I don't have a big problem with that we'll see that happen because it'll roll into the equity or retained earnings as of January 1st, 2023 it'll be here in net income it'll roll into the retained earnings no problem but what I wanna have is a nice clean income statement as of 2023 which we still have at this point in time so it has done what we would expect it to do let's look at one more report here let's just use this tab and go down to the inventory inventory valuation summary let's look at that one and as of well this day it'll work now we've got the units of inventory the quantity of inventory and then the total this is at cost and that adds up to the 2896 which gives us the same number as is on the balance sheet that's the point we're tracking not only the dollar amount but also the units the sub ledger then if we take the units times the cost should tie out to what is on the balance sheet from the sub ledger