When you issue a build for an item, you will not see a change in inventory asset on the balance sheet.
What happens is that QB takes the value of each item that is used to make the build out of the inventory asset account, adds them all up, and puts that value back in the inventory asset account as the new item that you built.
A zero sum entry, the value taken out equals the value added.
This problem has been rattling around the forums awhile, QB does not show payments on the invoice. I finally figured out how to do it. The problem is the fields that QB selects and how it handles them on the default invoice. You and I think total means what is due to the business, but QB thinks total means what was billed and does NOT include payments.
Bring up your invoice in designer, delete the “Total” block at the bottom (click in it and hit the delete key).
Click the button “Add” and select “Data Field” use the scroll bar to select “Balance Due”.
Do it again and select “Payments/Checks”.
Move those fields to where you want them, I put them toward the bottom, with balance due last. (if you have a tear off portion on the invoice the total block must be replaced by Balance Due too)
Do a print preview to make sure things line up. The invoice will show the total of all payments in the Payments block and it will show the balance due in the balance due block.
In some cases including sales tax in your selling price can’t be done the way I suggested when I talked about an invoice. A prime example of that is a bar business. Bars sell drinks across the table and do not calculate sales tax separately.
But bars still need to pay sales tax on what was sold.
The math still holds as to how to calculate what part of sales is sales tax and what part is income (see the other post to see the math). But the reporting on the financial Profit and Loss Statement has to be different.
Normally sales tax is a pass through activity, you collect it, you hold it and you pay it. It is seperate from sales income.
When you run a bar it is part of gross sales, so when you back it out to pay sales tax to the state, you have to expense it. If you do not expense it, you are paying income tax on the sales tax you collected.
So when you calculate the sales tax owed on gross sales you need to make some journal entries. Debit an expense account called something like “Included sales tax expense” and credit “Sales tax payable” for the amount. That takes the sales tax paid to the state out of gross sales when the expenses are deducted on the P&L and shows what you owe to the state comptroller.
As near as I can tell QB has used averaged cost since its’ inception. There is no way to change average cost with out some major hurdles that I won’t get into because they involve too many steps and are prone to errors. I have messed with this trying to get it to work for some time and there is just no easy way.
It makes no sense to me why QB refuses to implement FIFO or specific cost, even though as QB once told me “FIFO has long been a request of QB users.”
When you consider that QB is made by Intuit, who also makes Quicken, and Quicken does Specific Cost really well (Stock Portfolios) you would think that the two divisions would talk to each other and share programming code and at least implement specific cost in QB.
But like most large corporations one department doesn’t seem to talk to another. Must be the “I can secure my job if I can do what others can’t, so don’t share” theory of job security.
The secret programming aspects don’t stop with cost though, Quicken can pack the data base, Quicken can archive past years data and reduce the file size - none of which QB can do.
If FIFO, LIFO or specific cost is important, all of QB’s competitors do one or more of them.
QB has a limit on names, 14500, seems like a lot until you have been in business awhile. QB will not let you delete an item if it was used in any transaction for the life of the file.
Marking the item inactive will get it off the screen but it is still there taking space and “reserving” the name, a name once used cannot be used again.
But you can merge names, which of course merges the items and all transactions for them, so be careful. Decide what name you want to stock it under, then bring up the other items and change the name. QB will ask if you want to merge the items, say yes.
And while we are on the subject of names, the names that you buy things under also count, so if you start using vendor names for each and every gas station you use while traveling, you will hit the limit fast. When ever possible use a generic name like gas, food, lodging, printing, etc. and if you want you can put the business name in the description block.
Quite often I see this in the QB forum, a question about bulk inventory items and how to track them for COGS. Mostly from restaurants, but also from auto service where they buy bulk oil and shop supplies.
It is pretty hard to track how much flour (as an example) you use on a day to day basis, and yet flour is an inventory item and its’ cost should be tracked.
What I suggest is to order and stock your flour and stock it in the container it comes in. In other words if you order 10-pound bags, then stock it by the bag.
When you take a bag off the shelf to use it in the kitchen, use inventory adjust and set the adjusting account to COGS, then lower the quantity of the items taken off the shelf and click ok.
It is not a 100% day by day accurate way to track bulk items but over time it works out just fine since the only reason you would take a bag off the shelf is because the old bag is used up.
Use your imagination and replace flour with what ever you are buying in bulk, booze, salt, grease, oil, solvent, what ever.
If you want to pay your sales reps on gross profit (the difference between the sales price and the cost of the item(s)) then you need to be able to bring up a report by sales rep that shows that calculation.
You have to have your sales reps listed in the sales rep list, and you have to have added a sales rep data box to your invoices and sales receipts, and of course when the rep makes a sale he has to select his name in that box. Assuming the all that is being done.
Bring up a profit and loss statement, click Modify Report, then click the tab titled Filters. In the list box titled Filters scroll down and find Rep, when you do the drop down box to the right of that list will change to Rep, use the drop down arrow and select the sales rep name. Then click OK.
Refresh the report. It should show the total sales for the rep and the cost of the sales.
Memorize the report (I would use the sales reps name, especially if you have more than one sales rep). Memorizing the report makes it easier to bring it up next time.
When you select the filter for sales reps in the P&L report, keep in mind that if you select all sales reps, nothing will happen to the P&L - after all - all sales reps means all sales. But there is a bug, well I consider it a bug, if you select multiple sales reps and click on their names, what QB does is add up the sales for all the identified sales reps rather than reporting each one individually as I would think it would. That could be handy if you want to see what one group of sales reps are doing compared to another.
IF, notice the word if - very important, if you have some inventory items on hand when you go to create an inventory item for the first time in QB you should know (before you create the item) the number on hand and the total value.
When you create the inventory item for the first time, enter the number on hand and the total value as well as all the other things.
When you do that QB will do all the behind the scenes accounting for you. The cost of the item will be determined and the total cost (value) will be posted to two accounts: inventory asset and opening balance equity.
When you have finished entering all inventory that is on hand (creating new items with a quantity on hand) then go the reports menu and print a balance sheet - that will show you the amount in opening balance equity.
In your chart of accounts there should be an owners equity account. If you have more than one owner there should be an equity account for each owner (you may have to create them).
Use the menu item Company>make journal entries - that brings up a screen. First line select the opening balance equity account and as a debit enter the number on the balance sheet, second line select owner equity and enter that number as a credit. That moves the number from opening balance equity to owner equity.
If you have more than one owner you will have to make more than one entry and enter some portion of the opening balance equity to each owner.
I have an entry on equity accounts in the Misc category too.
Above is a pic of my QB screen. This is how it opens when I start QB, the reminders window and the Home window open all the time. You can set yours up and set what ever windows you want to always be there.
First grab the Home window and drag it up and to the left, the setting I have it at is the minimum it will shrink without causing scroll bars and hiding the information.
Then open, size and place the windows you want to always open when you start QB.
Go to Menu>Edit>Preferences and select the Desktop view, click in the radio button, save current desktop. Click OK.
Then open Preferences again and select the Desktop view again, this time click in the radio button that says “keep previously saved desktop” and then click OK.
Bugs and Quirks
Cost block
The cost block on the inventory and inventory assembly screens does not do what the QB help says it does. QB help says you can increase the cost of the item there to reflect the added overhead.
Well let me re-phrase that a little, you can change the number, that changed number will show up in all your reports, BUT QB does not use that number when it does the cost calculations. So it is really useless.
Quantity needed in an assembly
Logically you would think that since there is a quantity block for each item used in building an assembly that if you put zero in there for one of the items, QB will ignore it when building the assembly. NOPE. QB defaults to a quantity of one.
Purchase Date
Interestingly enough if you accidentally receive an inventory item with a future date, QB will stock the item. Well it shows the item as being on hand in the item list. But you can not sell it or use it in an assembly until the date arrives. So if you get a “not enough of that item to sell” warning, and the item list shows enough on hand, go back through your receipts and check the dates received.
Inventory cost
QB calculates average inventory cost and it uses the life of the item to do that average, not the current fiscal year as it should. BUT, sometimes if you sell the item down to zero on hand and then buy more QB will start the calculation all over again with the present cost, keyword here is sometimes. In playing with it I cannot find a reason why sometimes it does and sometimes it doesn’t. If you sell the item to a negative quantity on hand it never does it.
Sales Tax Groups
When QB does a sales tax group it calculates the sales tax for each item in the group, rounding that number to two decimal places, then it adds up all the sales tax items in the group for the total tax the group charges. Quite often that results in a penny or two more calculated by QB than if you calculate the tax as a whole due to the rounding of individual items. There is no fix for this problem, as near as I can tell it has existed for more than a few years.
Inventory Assemblies
Do not leave a blank line in between items in the build list, QB acts funny when it finds them.
Copy Item
The Menu item that says Copy Item is there just to drive you nuts - it does not work.
Auto Build Assemblies
QB does not do this at all. A lot of us want that feature, but a lot of the experts are against it. They seem to be against it cause they start in with the what if this and that when looking at the process from a very complicated standpoint of manufacturing. That is all well and good and the reasons are valid. But in my opinion if you have a very complicated manufacturing business you are probably using a dedicated accounting/work-flow software solution rather than QB. And even if those limitations were there, QB has so many other quirks and limitations that have existed for so long, what is one more? If you really need that function some of QB’s competitors have it.
QB Won’t Print
If QB stops being able to print to your printer, rather than re-installing the whole shootin’ match, deal with the printer configuration file itself.
With QB closed …
The file is called “QBPrint.qbp” (without the quotes), where it is, well that is another problem. You’ll have to search for it. In Windows, press and hold the windows key (down there between the Ctrl and Alt keys on the left) and hit the F key (the letter F not the function key). That brings up the Windows find function, select Find files and Folders and then enter the name of the file to be found.
When windows finds it right click on it and change the name to something like QBPrint-old-qbp.
Start QB and then select the menu File>Printer Setup, that will create a new printer file with the original name and things should, repeat, should work.
Sales Tax is dumb!
QB will not let you set a flat rate for sales tax, nor will it let you create an other charge item and point it to sales tax payable - dumb!
Non-inventory Items
QB restricts items from pointing to this or that kind of account a lot (like the above entry). For some reason QB does not restrict you from selecting an income account when setting up a non-inventory item. Non-inventory items are supposed to be for expenses, why QB would not restrict the selection is a mystery. Use service items for income, that is what you do, you perform a service.
Non-inventory items and assemblies
Do not use a non-inventory item in an assembly build, it does not work the way QB help says it will. What will happen is that the cost you enter in the cost block on the non-inventory item will go to COGS immediately when the build is created. That is wrong the cost should be held in the cost of the build and not sent to COGS until the build is sold.
QB does not hold the value of a non-inventory item marked for resale as it should, so when you use it in a build there is no value to add to the cost of the build. So what QB does is take the amount you entered in the cost block of the non-inventory item and send it to COGS immediately.
Since you had an expense when you bought the non-inventory item, using the non-inventory item in a build, adds that expense again in COGS. Not only is doubling expenses, but COGS should not have an entry until the assembly is sold.
Invoice Numbering
QB is interesting, the invoice numbers increment automatically, but did you know that if you add a letter to the invoice number, the next invoice will keep the letter and increment the number before the letter? I add a “-H” to the number to show we are invoicing for a seminar held at a hotel rather than our usual location. You do have to delete the letter on the next invoice or it will show up on all subsequent invoices.
Tracking back-orders
Sorry unless you ponied up the money for Accountant, Manufacturing and Wholesale, Retail, and Enterprise editions, you are just out of luck. Evidently the designers of QB think no one else has back orders.
Now someone explain to me why an accountant edition would need to be able to track back orders? What they run out of pencils?
Ok Ok I am being facetious, they need it cause in theory they audit the other high dollar versions.
In my view this is a major problem with QB, and it causes major problems by not having that ability in the versions used by most of us. Not having a way to track back-orders means you can sell something you do not have - that is a problem! And to me that makes it a bug!
Hiding the bank balance in Enterprise
Julie W let me in on a little trick to get around a quirk, sounds more like a bug to me, in 2006 Enterprise Solutions.
It seems that when you set preferences so that users can not see the bank balances, QB dropped the ball when dealing with refunds. Even though the user is restricted from viewing bank balances, when the user brought up the credit memo, QB popped up the bank balance for all to see.
As a work around Julie created a bank account called “Barter” and set it to a zero balance. Then in preferences she set the default account to the “Barter” account for her users. Now when a user creates a credit memo that is the account that pops up, with a zero balance of course.
The window does have the drop down arrow for other accounts, but when another account is selected, QB does what it is supposed to do and hides the balance.
Price List and Change Prices
QB help lets you think that if you set the price list or use the menu item Customers>Change Prices to set a markup of x% over cost that you will get that result when you sell something.
Yes and no.
When you first set the markup it works fine. But when you buy more of the item and the average cost changes the Price Lists or Change Prices does not update!
The programmers dropped the ball once again by not making the lists dynamic and self updating, guess they thought costs would never change huh?
Another problem with the price list, is that it does not use the actual average cost that QB calculates, it uses the cost that is entered in the block called “cost” located just below the description block on the item edit screen. A block that may or may not be correct.
If you are having a problem with inventory and QB is telling you that you do not have enough to sell or enough to build an assembly, and yet when you look at the item list there it is - check the dates of the item receipts. Right click on the item and select quick report and set the date range to all.
If there is a date in the future that is the problem. For some reason QB will display the added quantities of an item even if it was received in the future (the wrong date is used by accident when receiving the item) but QB will not allow you to use the item until that date arrives.
If you find one like that double click on it and change the date to what it should have been.
A sales tax discount (money you collect in sales tax but do not have to pay) is an income to the business.
When you click the pay sales tax icon, there is a button titled Adjust, click it, mark the adjustment as reducing sales tax, and select an income account, then enter the amount of the discount and click OK.
When you do that QB will move the amount of the discount to the income account you select and reduce the sales tax owed. I use the income account “Other Income”, but any income account will work.
The IRS has the neatest thing called a Section 179 deduction, that basically says that if your business qualifies you can deduct the cost of equipment in the year you bought it rather than dealing with depreciation over some span of years. And the IRS considers damn near anything equipment, furniture, computers, software, video, audio, all kinds of things. And if you bought more than the allowable deduction, you can carry forward to next year the remainder.
What you are supposed to do is to buy the equipment and use an account called something like Office Equipment (an asset account) to record the purchase and then at the end of the year you make an adjusting entry to move that value out of Office Equipment and into the 179 deduction expense account.
I took a shortcut. My accounting friends are going to cringe at this, accountants have no sense of humor sometimes <smile>. I created expense accounts that reflect the Section 179 catagories. My account list looks like this (indented names are sub accounts) :
Section 179 Deductions
A - Computer Equipment
B - Video and Audio Equipment
C - Cellphone
D - Copier, Calculator
E - Furniture
G - Tools, Machines, Equipment
K - Software
Notice the skip in lettering? That is because the IRS uses those letters when you report the category on the Section 179 form. The missing category (letters) are ones that do not apply to my business so why list them in my chart of accounts?
Your tax guy can give you the whole list, or if you have a copy of TurboTax for Business they are contained in there.
So when I buy software (as an example) I record the expense directly to the Section 179 deduction sub account “K - Software” and when I do my taxes I print out the Section 179 account quick report so I can transfer the numbers to the correct form for IRS reporting.
Last year I began a paperless office, it takes a couple of extra steps but what a nice idea. Here is how I do it, it might work for you.
I set up a folder with the company name-paperless-<year>, then sub folders for the following (there are actually more but this so you get an idea)
Financial
bank-1
deposits
statements
bank-2
deposits
statements
Credit Card-1
Credit Card-2
Invoices
Invoices Paid
Purchase Orders
Contracts
Receipts
USPS
Gas
Food
Lodging
Printing
When I do a transaction I save the invoice to pdf in the appropriate folder. When an invoice is paid, rather than saving it all over again so it has the paid stamp on it I just move it to the paid folder.
I scan my receipts and print them to pdf in the folder they belong. Since my scanner software dates the receipt and I categorize them in folders there is no reason to change the name. Once it is saved in pdf I delete the scan from my scanning software - no reason to keep it. And of course when the receipt is scanned there is no longer a reason to keep it.
I keep everything in pdf because everyone can read a pdf, no special software is needed in the event of an audit. I print my tax returns and K-1’s to a folder called IRS too, then when I am done with the year I copy the whole folder to a CD as an annual record.
I actually have a folder that is called “paperless-master” that I only use to create a new company paperless folder each year. The paperless master folder contains only the sub folders, nothing is ever saved to it so I can use it year after year to create a new paperless folder.
In windows explorer, right click on the folder and then select “Copy”, then select the top level folder and right click and select “Paste” - windows explorer will create a complete duplicate copy of the folders and call it “copy of <folder name>”.
Then click in the folder name to highlight the folder, click one more time and the name will highlight, click one more time and a cursor will appear in the name and you can delete the words “copy of” and change the year to make a new year paperless folder.
All companies should have equity accounts, and I think they should be set up this way.
Equity-name
Equity-drawing-name
Equity-investment-name
Where ‘name’ is the name of the owner. One set of accounts for each owner.
Equity is the amount of the business you own, and to the business, that is a debt the business owes, as a result the amount is carried normally as a credit balance.
The Equity-drawing is an account used to hold the amounts of money an owner took out of the business. Money in this case really means value, if you took an item out of inventory that has value and that value is what is held in this account. Since it is a value that the business no longer owes you, a balance in this account is normally held as a debit.
So when you write your self a check, use the account Equity-drawing to record it. If you add money, or something that has value to the business, then the addition is Equity-investment and the Equity-investment account normally has a credit balance.
These accounts are used to hold the owner transactions during the year. At the end of the year when you do your EOY financial statements, QB creates an account called “Retained Earnings” and the net profit goes there on the first day of the new year.
Income taxes often require you make some adjustments to your financial records and your accountant or tax guy tells you what end of the year entries to make. Once that is done, you can and should “roll up” the equity accounts.
Unfortunately this is another area QB dropped the ball. There is no easy one button approach to rolling up equity annually. You have to make journal entries to do it. Why do it? Well you really do not have to if you are the sole owner, but for a business with more than one owner you have to distribute the profit according to the business agreement. I think even a sole owner should do it, if you do it annually then during the year you can see how much you are taking out of the business for that year.
So to roll up the equity accounts, put the final profit and loss statement on the table in front of you and bring up the journal (Menu Company>Make journal entries). I was always taught that the first line of a journal should be the debit, but it really makes no difference. (NOTE: each journal entry is a seperate entry, hit save and new after each one)
Set the date for the first of the year and …
IF … Equity-investment-name has a value
Debit Equity-investment-name for the amount
Credit Equity-name for the same amount
IF … Equity-drawing-name has a value
Debit Equity-name for the value
Credit Equity-drawing-name for the value
Now you are ready to distribute net profit which is held in the account Retained Earnings.
Debit Retained Earnings for the amount that goes to the owner
Credit Equity-name for the same amount
Do this for each owner. When you are done, Retained Earnings should have a zero balance, as well as the investment and drawing accounts - for the first of the year. Any amounts that were posted to those accounts after the beginning of the year will still be there waiting for you to do it again at the end of the current year.
Note: The above assumes you had a profit, if you had a loss the value in retained earnings will be a negative ( a debit) so the entries will have to be opposite, Credit retained earnings and debit owner equity.
There are a lot of variations for dealing with work in progress and there is no way cover all kinds. One common scenarios is that you order raw material of some kind and you send it to someone else to make what you sell. So the cost of what you sell is the combination of the cost of the raw material and the bill from the other company who turned your raw material into a product.
I buy the raw material as an inventory item. Then when I have to ship it out to a business to be turned into something salable, I use inventory adjust to move the raw material I am sending out to an other current asset account I set up called WIP. That adjustment takes the raw material out of inventory and holds that value in the WIP account.
When I get the bill for making something from my raw material, I receive the inventory just as you would normally. That gives the item a cost.
Then look at the WIP account and write down the balance.
Then use inventory adjust, set the adjusting account to the WIP account, and mark the adjustment as a value adjustment. Find the item in the list, and add the amount from the WIP account to the total value of the item. DO NOT change the number of items on hand.
When you click save the value of the raw material that was in the WIP account will be added to the value of the items that were made and a new cost per item will be calculated. The WIP account will have a zero balance.
You can use variations of this process to cover just about any process where more than one transaction is involved in determining cost.
Create an other current liability account called something like Customer-deposits.
Create a service item in your items list called something like Deposits and in the account point it to the Customer-deposits account you just created.
When you accept the deposit, use the deposit item on an invoice. What happens is that the money received (the deposit) is sent to the other current liability account. It is a liability because you owe the customer something, either a refund or a product.
When the product or job is done, invoice the customer for the full amount, then as the last entry on the invoice enter the deposit item and enter the amount of the deposit as a negative number.
This records the sale, takes the deposit out of the liability account and applies it to the amount owed, and the invoice will show the amount still due to you.
OR
If all that sounds like too much trouble …
Another way to do it is to create the invoice, then use receive payments against that invoice with the deposit amount being received. Then after that use the statement function to bill rather than a new invoice, the statement will show the deposit and subsequent payments made and the balance due. Receive payments against the original invoice.
And as an example of another way - easier in my opinion
To handle customer retainers (deposits) you need an “Other Current Liability” account, lets call it cust-deposit. Then an “Other Charge” item, which points to the cust-deposit account, lets call it use-cust-deposit.
To record the deposit:
Open the bank register, enter the customers name, enter the amount in the deposit column, and select the “cust-deposit” account. That puts the money in the bank, and creates a current liability in that amount.
To bill and use the deposit:
Create your sales receipt or invoice billing for what ever. Last item, enter the other charge item use-cust-deposit, enter a negative 1 (-1) in the quantity, and the amount in the rate.
The invoice will reflect the lower amount due, or zero. The amount of the retainer used will come out of the current liability account cust-deposit.
Sometimes you have to either pre-pay for items ordered, or pre-pay a deposit on items ordered.
To order and pay for the items
1. Create a purchase order for the items.
2. Create a current asset account, and name the account “Prepaid inventory” or a similar name.
3. Enter charges for the items by:
a. Entering a credit card charge. When QuickBooks indicates that you have an open purchase order for the vendor, do not select the purchase order.
b. On the Expenses tab of the check or credit card charge, click the Account field. Choose the other current asset account that you created. Then, save the check or credit card transaction.
That puts the amount of the pre-payment or deposit in the “other current asset” account you created.
To receive the items
Find the check or credit card charge for the transaction.
1. On the Expenses tab, select the line that contains your other current asset account.
2. Go to the Edit menu and click Delete Line.
3. Click the Items tab.
a. Click Select PO.
b. Click the purchase order that contains the items you paid for and then click OK.
If necessary, record additional expenses (such as shipping) on a new credit card charge or check. Don’t add additional expenses to the existing credit card charge or check.
Save the transaction.
That takes the amount in the pre-paid other current asset account and transfers it to the purchase of inventory.
Trade discounts. The differences between the stated prices of articles and the actual prices you pay for them are called trade discounts. You must use the prices you pay (not the stated prices) in figuring your cost of purchases. Do not show the discount amount separately as an item in gross income.
IRS Pub 334 Chapter 6 COGS, page 28
IRS Regs. Sec. 1.471-3(b) requires trade or other discounts to be treated as reductions in the purchase price of the inventory to which they relate, rather than as gross income.
So the end result of all that legaleeze is that a discount on what you buy for inventory is not income. The cost of the items purchased has to be reduced by the amount of the discount.
We write a contract for a future consultation, when we do I create a sales order to reflect the terms of the contract. My daughter (da boss) actually performs the consultation and I send out an invoice the next day.
(note - sales orders are only available in Premier and higher)
I’ve been trying to figure a way to create some kind of reminder so I would be able to look at the date and see that an invoice needed to be created. The open sales report is useless since it will NOT allow sorting on the date. When a customer has open orders for more than one date in the date range (month) the report lumps them together under the customer name - useless!
On top of that, I wanted an automatically updated listing, this is a computer after all.
I finally figured out that if I set the flag “to be printed” on a sales order it will display in the reminders window in chronological order. When I create the invoice I remove the to be printed flag and it goes away in the reminders window.
And what is really nice is that if I change the date on the sales order and then save it, it reorders itself on the reminders list.
If you want to sell at a price that includes your sales tax, it can be done. QB doesn’t have a button to do it, but here is one way.
What you want to do is discount the price received so that the selling price + sales tax = received price (if that makes sense)
If your tax rate is 8.25% as mine is
(8.25% = .0825).
so
You add the decimal to one and get 1.0825, then …
You divide 1 by 1.0825 = .9237875
That is your constant (what I am going to call it anyway for this discussion).
If you multiply that constant by the $10 received you get $9.24 (rounded up)
$9.24 * 8.25% (9.24 * .0825) = 0.76 (the tax on the sale)
$9.24 + 0.76 = 10.00
What this did was prove that the tax can be calculated correctly with the constant just for your own peace of mind knowing it works.
So now you subtract the constant from 1 to find what the actual discount rate is. A discount rate is basically how much you reduce the price.
1 - 0.9237875 = 0.0762125
0.0762125 is the decimal representation of 7.62125%
So what you do is set up a price level called something like “includes tax” and when you mark an item in the list (mark all in this case) and where it says to reduce all prices by, enter the percent 7.62125 (do not round the decimal).
Then when you sell something make sure you select this price level and tax will be included in the total price that you advertised. Tax will show up in the tax box, and if you have sales tax set up correctly it will go to sales tax payable.
What the customer sees is a reduced price for the item and the sales tax, when added together they equal the advertised price.
I pay an 8% commission on a specific service I offer, the commission is paid semi-annually so I wanted to accumulate a payable automatically. This works for me, You would have to change the amounts and names of items of course to suit your situation.
I have set up:
1. a “service item” TAKS at $850.00
2. an “other charge” as ‘pearson’ at 8%
3. a “COGS account” called COGS-pearson
4. a “service item” ‘pearson-fee’ and pointed to COGS-pearson at -8% with a sales price of zero
Then I created a group, and
1. First line I put the service TAKS
2. Second line the other charge (pearson)
3. Third line the service item (pearson-fee)
4. Type the description in the group description line.
Set the group to NOT print all lines so the customer does not see the commission.
When you sell the service use the group item. On screen you will see the fee computed, but when you print or print preview the fees will not be shown.
QB has a bug. When you use a sales tax group you specify each sales tax entity and the percentage they collect, and then just use the group to calculate sales tax - sounds like a plan huh?
Well it is in a way. BUT what QB does is calculate each sales tax item and does the rounding for that item, THEN it totals all the items in the group to get the final amount of sales tax. That can result in a rounding error of a penny or more.
There is no solution that I know of.
What QB should do, and doesn’t, is to provide a limit field in the sales tax group so that the total of all individual items in the group does not exceed the percentage listed for taxes.
Occasionally you have to pay for the item, and then also pay for freight or import taxes or something else that is really part of the cost of the item.
You can use a clearing account, basically an account that has no use except to hold a value until you use it.
When you buy the item, the cost is added to inventory.
When you pay for the added expense use the clearing account to record the expense. Then find the balance in the clearing account and write it down. Bring up inventory adjust and mark it as a value adjustment. Find the item and in the value column enter the new total value (the old value plus the amount from the clearing account. Use the clearing account as the adjusting account when making the adjustment.
That will remove the value from the clearing account and add it to the cost of the item. Do not increase the number of items on hand when you do this.
I have two inventory locations and this is the way I handle it (there are probably other ways to do it too).
For each item I create a sub item which is titled to reflect the second location as an example:
Parent Item: widget
Sub Item: widget-A
where the “-A” tells me it is the second location.
When I buy inventory it is (in my case) received at my location so I bring it on the books under the parent item.
When I move some of the inventory to the second location I use the Inventory Adjust and reduce the inventory quantity in the parent and increase the sub item by the same amount. This moves the quantity from one location to another and the expense of the adjustment zeros out since the reduction in one inventory item is offset by the increase of the other. I use the spoilage expense account for the adjustment, though since it zeros out any expense account could be used. The inventory quantities at each location for each item are easy to see in the item list.
When an item sells I use the widget item or the widget-A item depending on whether it sold from my location or the second location.
I have a situation where a school orders from me and the district is billed and pays. Multiple schools in one district.
When I set up the customer, I name it with the district-name-school-name. In the bill to address is the district billing address. In the ship to address is the school address (this is on a sales order). From the sales order I use a dymo label maker to print the shipping label, then convert the sales order to an invoice.
On the invoice screen I select packing slip and print it, then select invoice and print it and then save it as a pdf (paper less records) as well as saving it in QB. Both the packing slip and the invoice have the purchase order numbers on them.
Pack and ship the items, send the invoice in the mail. At the district end they see the district name and the school name so they know where the item was shipped to.
Often when I get a check it is for several invoices for several schools. Since the check stub they send itemizes the invoice numbers, I receive payments against each school invoice and put the check number in the block for it. The total of the invoices received against equals the total of the check.
Works in my situation, might work in yours.
On the inventory (and the assembly) item screen there is a block titled cost just below the description block. The QB help for this block says something about entering overhead and other markup costs. Wrong! It just does not work that way. Any cost you enter there will show up in reports, but it will not be used when COGS is posted.
You can prove that by (in a test file) sell the item, bring up a profit and loss statement and look at the total in COGS, then bring up the item screen and enter something more than the average cost. Sell the item again and you will see that the COGS account increases by the cost of the item or assembly, NOT the amount you entered in the cost block.
One thing that the QB help file does not make clear is how it handles the cost of inventory and non-inventory items.
When you buy an inventory item, the cost is added to the total in the account called “inventory asset.” QB also calculates the average cost of the item based upon the number of items on hand, their cost, and the new purchase. One thing to realize is that QB averages cost based upon the life of the file, NOT this year as it should (according to the IRS requirement for perpetual inventory).
When you sell an inventory item, QB takes the total cost of the items sold out of “inventory asset” and sends that cost to the COGS account.
So far all is good. But QB says you can mark a non-inventory item for resale, when you do that it opens a screen that looks just like the inventory item screen. You would think, since the screens are the same, that the same thing would happen …. the item cost would be held until it is sold. NOPE!
When you buy a non-inventory item the cost of the whole purchase is immediately sent to COGS (assuming that is the expense account you selected). So if you are selling all of what you bought, that is not a problem. But if you got a deal on a bulk purchase, the whole purchase is expensed - that is just wrong!
If you sell the whole purchase before the year is over, that works just fine. But if you have some on hand at years end, their cost is still in the expense account - and it should not be.
On top of that, QB will not, does not, carry a balance on hand for non-inventory items even when marked as being for resale.
QB does not handle “Use Tax” at all. (there are two ways to do it in this entry)
Use Tax being the sales tax the company owes on items bought across state lines where no sales tax is paid on the purchase but there is still a requirement to pay that sales tax to the state comptroller, or the sales tax on items withdrawn from inventory and used as demos, samples, and for personal use.
The only way I have found to handle it (relatively easy), is to set up a class “sales tax due” and **remember** to identify transactions with that class. Then just before my quarterly tax payment date I run a class report on that class to get the total of the purchases, demos, samples, and personal use for the period of the sales tax payable requirement .
Outside of QB I use a calculator to determine the sale tax liability on that total, That total is also reported on the sales tax reporting form to the state.
I have an expense account set up titled “sales tax paid”
When I bring up the pay sales tax window I use the adjust sales tax button to enter the new amount of sales tax due, and assign it to the ’sales tax paid’ expense account. Then pay the tax bill.
When sales tax time rolls around, do a quick report on the account “Use Tax Due”, that will total the amount of use tax you owe, the memo block will list the total of the invoices that the use tax is due for, use a calculator and add them up, this is the amount you report for the value of use tax due.
Bring up pay sales tax, click the adjust button, mark it as an increase, select the tax vendor, and select the “Use Tax Due” account as the adjusting account. Enter the amount of Use tax due, click ok.
Update:
Carrying Dawn’s solution one step further and accounting for inventory items that are withdrawn from inventory and used in the business, I found this way to do it.
Create an expense item called “Use Tax Paid” and point it to the expense account with the same name.
Create an other charge item called “Use Tax Due” and point it the liability account with the same name.
Open the item list and right click on the item, look at the very bottom and write down the avereage cost of the item, you should NOT use the cost in the cost block just below the description block, most times this will be the same but not always, and QB uses the value at the bottom called average cost.
Bring up a sales receipt, select the item and then click in the rate column and enter the average cost figure you wrote down. Mark the item as non-taxable. Then do the calculation and enter the item Use Tax Paid and the amount, then on the next line enter the item Use Tax Due and in the quantity column a negative one and the same amount, and enter the amount of the sale in the memo block. (Invoices and sales receipts will not allow you enter a negative price.)
You could just sell the item at cost to the company and let the sales tax be calculated automatically as sales tax due, but for some reason states want the use tax number seperate. When I talked to the Texas comptroller for sales tax audit department they said they wanted it called out separately and if it wasn’t then during an audit they would have to do the calculations all over even though the result (tax due) is the same and the audit file would show that you were not reporting correctly. I got the impression that having that notation in my file would not be a good thing since it would tend to make them more willing to look at me again in the future. Your choice.
The IRS says that any cost involved in acquiring an item for resale, or in building an item for resale is COGS. That includes taxes, shipping, import duties, etc. (pub 538)The IRS also says that COGS for an item must be expensed during the year the item is sold. [Sold not purchased.] (Rev Rul 71-234)
Basically then there is two ways to approach including shipping (et al) in the COGS calculations.
You can carry the total cost of shipping (etc) as an entry to COGS at the time of purchase. Then at the end of the year you are supposed to determine if the entire number of items for each shipping expense has sold. If it has then no problem, otherwise you are supposed to do a journal entry to offset the shipping amount that is to be carried forward to the new year for the unsold items. So what you end up at year end is inventory being carried forward and shipping costs for inventory on hand being carried forward. IMO this would be hard to track.
Another way to do this is to allocate the shipping, etc to the cost of the item at purchase time. When I receive several items on a purchase order and there is freight involved, I ‘guesstimate’ the relative shipping portion of shipping for the line items. On receipt, I will tab over to the total column for each line item and allocate a portion of the freight. When I change the total for the line item QB will recalculate the price per item. This new cost per item is saved in QB and used to determine average cost. That average cost per item is used to post to COGS when the item is sold, and this complies with the IRS requirements to expense inbound freight, etc in the year the item was sold.
Out bound shipping, the shipping you pay to send the item to your customer, is an expense and not COGS.