How to Add an Inventory Part to the Item List in QuickBooks 2014
Inventory parts are those items in invoices and purchase orders that represent physical goods that you buy, hold, and sell. For example, if you’re a retailer, all that stuff that’s sitting out on the shelves of your store represents inventory. If you’re a manufacturer, the raw materials that you buy and then use to assemble your products represent inventory.
To set up an inventory part, display the New Item window and select Inventory Part from the Type drop-down list. QuickBooks displays the Inventory Part version of the New Item window.
Use the Item Name/Number box to provide a descriptive but brief code or name for the item. If the item is a subitem of some other parent item, select the Subitem Of check box and then identify the parent item by using the Subitem Of text box.
The Purchase Information and Sales Information boxes let you determine the information that appears in purchase orders and invoices. The Description on Purchase Transactions box in the Purchase Information area, for example, lets you provide the text that QuickBooks displays in purchase orders.
You can also guess at the purchase cost by using the Cost text box. Specify the cost of goods sold account that should be debited when this item is sold by choosing it from the COGS Account drop-down list, and identify the preferred vendor for purchases of this item by choosing that vendor from the Preferred Vendor drop-down list.
The Sales Information boxes provide the information that QuickBooks needs to correctly include the item in an invoice. The Description on Sales Transactions box provides a space that you can use to supply the description that QuickBooks should use for this item on your invoice.
The Sales Price box enables you to provide your price for the item. If you’re subject to sales tax, you see (and should use!) the Tax Code drop-down list to specify whether the item is taxable or nontaxable for sales tax purposes. Finally, the Income Account drop-down list lets you specify which income account should be credited when this item is sold.
If you’re confused about seeing three Account drop-down lists in the Inventory Part version of the New Item window, keep in mind that when you sell an item, you track the income by crediting an income account and the cost of goods sold by debiting the cost of goods sold account.
Use the Inventory Information boxes to describe how QuickBooks should handle inventory tracking for the item. For example, use the Asset Account drop-down list to specify which account QuickBooks should use to track the dollar investment in this item. Typically, you use the Inventory Asset account; however, you can conceivably use some other asset account.
Use the Reorder Point box to identify the inventory stocking level at which you want QuickBooks to alert you to reorder the item. If you have inventory on hand for this item, enter the quantity that you have on hand and the value that you have on hand in the On Hand and Total Value boxes. You also specify the date as of which your quantity and value information is correct by using the As Of box.
You really shouldn’t be entering inventory balances for an inventory item when you set it up in the Item list. You should be entering or changing inventory quantities and values when you purchase the inventory (recorded in the Create Purchase Orders window or the Write Checks window) and when you sell the inventory (typically recorded in the Create Invoices window or the Sales Receipts window).
If you enter a quantity other than zero or a total value other than zero in the New Item window, you also need to make a journal entry to record the other half of the transaction. If this “other half” business sounds complicated: You shouldn’t be entering quantity or value information in this window.
You can click the Spelling button to check the spelling of words and phrases that you’ve entered in the New Item window. You can also click the Next button to save the information that you’ve entered for an item and redisplay the New Item window so you can add another item.