Chapter 1
Chapter 2
Chapter 3
Chapter 4
Chapter 5
Chapter 6
Chapter 7
Chapter 8
Chapter 9
Chapter 10
Chapter 11
Chapter 12
Chapter 13
Chapter 14
Chapter 15
Chapter 16
Chapter 17
Chapter 18
Chapter 19
Chapter 20
Chapter 21
Chapter 22
Chapter 23
Chapter 24
Chapter 25
Chapter 26
Chapter 27
Chapter 28

Chapter 6

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Inventory part items

If inventory is turned  XE "Inventory part" on under File|Preferences|Purchases & Vendors orFile|Preferences|Inventory/POs, inventory part items may be set up. Each Inventory item works like three items, applying to three accounting events:

1. The item is bought, and the cost goes into an inventory asset account.

2. The item is delivered or expended for the customers benefit, and the cost is charged as an expense.

3. The item is invoiced to the customer, using an income account.

Inventory items have a significant limitation. When the company data file gets large, a function called Condense Data (Chapter 25) is used to prune out old transactions. Old inventory transactions are not affected by this process, but remain in the file.


Establishing an inventory part item requires an inventory asset account, and involves several decisions:

  1. Define the item carefully.  All items of the same item name will be valued at the same average price.
  2. Name the part.  This name will appear on the screen for purchase documents and for sale documents, and may be printed.
  3. Write a purchase description, for information of suppliers.
  4. Guess at purchase price; use zero if not predictable.
  5. Determine the sales income account.
  6. Decide on the COGS (Cost of Goods Sold) expense account to be charged upon sale.
  7. Select a preferred vendor, who will become a default (but changeable) for ordering and when reporting.
  8. Decide on re-order point, if practical.  The program will remind you when sales would bring the inventory level below this number.
  9. Write a description for the customer.
  10. Set the selling price.  File|Preferences|Sales & Customers or Preferences|Sales/Invoicing allows setting a default markup percentage, which will suggest a selling price, based on the purchase price.
  11. Taxability status must be established.
  12. Add any custom fields needed (see section below on Custom Fields.)
  13. Sub-items are discussed below with Parent Items.
  14. Determine stock on-hand.  The count and value can be entered on this form, which will record an opposing transaction in Opening Bal Equity.   To select another opposing account, use Inventory Adjustments in Chapter 28.

When all of these decisions are made, the information can be readily typed into the form.

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Last modified: May 21, 2004