Rustler’s Quickbooks Tips

So you sell something you don’t have- what happens?

Inventory for the item goes negative.

COGS is correct, QB takes the average cost of the item and multiplies it to determine total cost for the sale and posts it to COGS.

Inventory asset is correct, the total cost of the sale is deducted from inventory asset.

Sales income goes up by the amount of the sale.

So what is the problem, everything is right. Well not exactly, there is a cost being booked that you have not paid for, that is one problem. And another is that the cost being booked is the old cost, you may buy stock at the same old cost then again you may not, and of course you have a negative quantity for the item in stock. And Inventory Asset went down by an amount that was not there.

And then you buy some, buy some at a higher cost.

QB makes some correcting entries for you.

Inventory is updated to reflect the purchase quantity less what was sold that you didn’t have.

Inventory Asset is increased by the amount of the purchase.

The difference between the cost that was booked when you sold stuff you didn’t have and the new cost is posted to:

COGS as a bill, yes a bill, so if you are seeing bills show up in COGS that is most likely the reason. The problem is figuring out why the bill is there. The bill is posted as of the date of the bill, and the original cost is posted as of the date of the sale, There is no way to correlate the two in QB.

And Inventory asset shows a bill for the difference in cost amount as a negative, just like it did when the cost of the sale was deducted at the time of sale. Same date problems exist and the same lack of correlation as with the posting in COGS.