Rustler’s Quickbooks Tips

Drop shipping is when you do not stock the item being sold, someone else does and you tell them to ship it using your return address so it looks like it comes from your business. So basically what you order is your cost of goods sold, and I see no reason to keep an inventory list. Drop shipping can have two conditions:

Condition 1. You get the order and the full payment, you order the item and pay your cost.

I would create a service income item for sales, and use that on the sales receipt to record the income from the sale. In the description block you could put what was sold.

Then order the items from the supplier using a generic non-inventory item that has COGS as the expense account. That will give you a payable that is your cost.

Condition 2. The order goes to the shipper and the shipper gets paid, you get a check for your share of the purchase.

Create an Other Charge item and call it something like sale-cost, and select the COGS account as the expense account.

I would create a service income item for sales, and use that on the sales receipt to record the income from the sale. In the description block you could put what was sold.

Then put the Other Charge item on the next line, enter a -1 (negative one, or higher of course if you had more than one ordered) and enter the cost.

That sends the cost to COGS, and the sale to sales income, the amount on the sales receipt will reflect the check you received and that amount will go to undeposited funds.

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The drawback to doing it this way is a lack of detail on what is selling and what is not, but I would expect (I don’t use drop shippers so I am guessing here) that periodically the drop shipper will send you a recap of your activity showing what was sold.