QuickBooks Tip – Understanding QuickBooks Inventory Cost

Be A Better Bookkeeper, From Our Guest Bloggers
If you are using QuickBooks to manage your inventory, you need to understand how QuickBooks deals with the cost of inventory items. Unfortunately, the term “cost” is used in several different ways, and it can get confusing. Here is a quick rundown of how QuickBooks handles things. I’ll focus on Inventory Part items, which are the true “inventory” items in QuickBooks, with a little detour to talk about Inventory Assembly items. Cost Fields in QuickBooks If you look at an Inventory Part item, you will see that there are two cost fields. Cost, on the left, is a "reference" field. That is, it doesn't have any direct bearing on the valuation of your inventory, the cost of your inventory in your inventory asset account. I wish they had another name,…
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QuickBooks Tip – Determing Cost of Goods Sold

Job Costing Tips, QuickBooks Setup & Cleanup
Question: How do I determine the Cost of Goods Sold for an item? Answer: I tell my clients that Cost of Goods Sold (COGS) is any cost incurred that directly relates to getting the sold goods out the door. I have them ask the question "Would you have this expense if you hadn't made the sale?" Typical examples of COGS are product purchased for resale, subcontractors or vendors you hire specifically for preparing a product for sale, shipping materials like packaging, freight costs of receiving the resale product and shipping the product to your customers, payroll/labor costs of your employees who are directly related to preparing the goods to be sold or shipped out (would you have hired them if you didn't have the product to sell?). Costs that are…
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