Inventory Accounting with QuickBooks 2012 - dummies

Inventory Accounting with QuickBooks 2012

By Stephen L. Nelson

Thankfully, most of the inventory accounting that goes on in a business gets handled automatically by QuickBooks 2012. For example, when you purchase an inventory item by writing a check or recording an accounts payable bill, QuickBooks automatically adjusts your inventory accounts both for the dollar value of the inventory and the quantity of the items.

When you sell an inventory item to a customer, QuickBooks again automatically adjusts the dollar value of your inventory and adjusts the quantity counts of the items you sell.

Basically, all this means is that QuickBooks maintains a perpetual inventory system — an inventory system that lets you know at any time what quantity of items you have in inventory and what value your inventory amounts to.

(In the past, smaller firms often used a periodic inventory system, which meant that business owners never really knew with any precision the dollar value of their inventory or the quantity counts for the inventory items that they held.)

Although everything in the preceding paragraph represents good news, several inventory-related headaches do require a bit of accounting magic. Specifically, if your firm carries inventory, you need to know how to deal with obsolete inventory, disposal of obsolete inventory, and inventory shrinkage.