A reader asked the following question:
We are a small contractor in San Diego and we are wondering how we get around having to always do an inventory adjustment to get our purchases to the correct COGS account? We have (2) departments but they are both doing construction projects: Service dept does smaller installs and Contracts dept does the bigger jobs so I have been doing a JE to move the material from the Contracts material COGS account to the service COGS account.
Is there an add-on for QB Enterprise 8 that we could use?
Thank you so much for your website/blog. I’ve been reading it faithfully every day!
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There are several inventory add-ons for QuickBooks Pro, Premier and Enterprise; check out these 3rd party add-ons at the Intuit Marketplace.
Recording costs and income with an item
Based on your comment about “always having to do an inventory adjustment in order to get your Purchases to the correct COGS account”, makes me think that perhaps your items are not correctly set up.
Make sure that your QuickBooks Inventory Items are set up so that they capture both the cost/purchase account as well as a sales account; this method is called a “double-sided” item.
When any type of QuickBooks Service, Inventory, Non-Inventory, Other Charge Item is set up this way you are able to capture the purchase price as well as the sales price.
When you enter a bill from a vendor for the inventory item (or write a check) you should be using the ITEM tab and not the Expense tab.
I’m confident that if you aren’t currently using the QuickBooks Purchase Order function that you would find that beneficial also.
Additionally, rather than using Journal Entries to classify whether it was the Service or Contracts Department – consider using “classes” to handle that.
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QB only allows one COGS account per inventory item. If you set your departments up as classes you don’t need to have a separate COGS account for Service and Contracts.
If you use classes you need to have a class on any tranactions that hits the P&L or you will have a lot of unclassified transactions. I recommend that you also set up a G&A Class and if you allocate any of your G&A expenses to jobs this makes it easier.