Easy-to-follow video tutorials help you learn software, creative, and business skills.Become a member

Creating an inventory item

From: QuickBooks Pro 2010 Essential Training

Video: Creating an inventory item

If you sell products, you can treat them as inventory or not. Inventory is what you call products that you keep in stock to resell to your customers. The way retail stores, wholesalers, and distributors do. This video starts with how money moves between accounts as you buy and sell Inventory. But you'll also learn how to create an inventory item. On the other hand if you purchase products specifically for work,you are doing for a customer, you don't need inventory. You'll learn how to create a non- inventory part item later in this chapter.

Creating an inventory item

If you sell products, you can treat them as inventory or not. Inventory is what you call products that you keep in stock to resell to your customers. The way retail stores, wholesalers, and distributors do. This video starts with how money moves between accounts as you buy and sell Inventory. But you'll also learn how to create an inventory item. On the other hand if you purchase products specifically for work,you are doing for a customer, you don't need inventory. You'll learn how to create a non- inventory part item later in this chapter.

The money associated with inventory moves from account to account as you buy inventory, hold it in stock, and then sell it. All these moves are the reason why you have to tell QuickBooks so much about the inventory items you create. When you buy inventory, money, say $500, comes out of checking account to pay for the inventory. That's a credit in the checking account. The money you spent on inventory shows up in the inventory asset account, because you still own an asset worth $500.

This is a debit in the inventory asset account. Then when you sell inventory, an income account gets a credit for the amount you sold the inventory for, say $1000. The customer owes you money, so your accounts receivable account gets a debit for the sell amount, also $1000. Because you've sold some of the inventory, you have to reduce the amount in your inventory asset account. So you credit that account for the cost of the inventory. That's the $500 you paid for it in this example.

That brings the balance in the inventory account to zero, because you've sold all your inventory. You have to take the cost of the sold inventory into account, so you debit the cost of goods sold account for the value of the inventory you sold, also $500. To create an inventory item and tell QuickBooks what it needs to know, you start in the Item List window. Click Item and choose New. In the New Item dialog box, click Inventory Part in the Type dropdown list.

In the Item Name/Number box, type a name for the inventory item. If you keep a lot of products in stock, numbers or codes take fewer characters to identify a product then spelled out names. You can use parent items and sub- items to keep your item list organized. To make an item a sub-item, turn on this Subitem of checkbox, and then choose the parent item. You can choose Add New to add a new parent. In this case, I'll create a new parent for inventory items.

I don't have to fill out anything, but the Item Name/Number box and an Income Account. If you create purchase orders for inventory, you can fill in the Manufacturer's Part Number box to help the vendor identify the product you're ordering. The Description on Purchase Transactions box is where you type the description you want to appear on purchase orders or bills. This lets you describe the product in terms the vendor uses. In the Description on Sales Transaction box, you can type a more customer friendly description, which appears on invoices or sales receipts that your customers see.

QuickBooks automatically copies what you type in the Description on Purchase Transactions into the Description on Sales Transactions. The Cost box is how much you pay for one of the product. A single six panel interior door, a pound of nails, a gallon of paint, or one door lock in this case. Even if you buy inventory in larger quantities, you still have to fill in the cost with the amount you pay for one unit. QuickBooks compares the Cost field and the Sales Price field to figure out your profit on each unit.

The Cost of Goods Sold Account is the account that tracks the product cost when you sell the product. QuickBooks calculates gross profit on products by subtracting the cost of goods sold from the income earned. If you don't have a cost of goods sold account, QuickBooks creates one when you create your first inventory item. You don't have to fill in the Preferred Vendor. This tells QuickBooks the vendor to fill in when you create a purchase order for this item. The Sales Price field is how much you charge for one unit of the product.

That's the same unit you used in the cost field. If you collect sales tax, choose Tax in the Tax Code dropdown if the product is taxable. The Income Account is the account you used to track the income from selling one of these items, Product Income in this example. When you purchase inventory, those products sitting in Inventory are an asset that you own. The asset account keeps track of the value of your inventory until you sell it. In this case, it's an Inventory Asset.

If you want to reorder or reminder when you're running low, fill in the Reorder Point box with a number that you want to trigger the reminder. A lower reorder point works when your vendor ship products quickly, plus you have less money tied up in inventory. When you create a new inventory item, you can fill in the On Hand field to tell QuickBooks how many you already have in stock. The Total Value field tells QuickBooks how much the ones you have on hand are worth.

QuickBooks adds that total value to your inventory asset account. The As of field tells QuickBooks the date for the addition of the inventory to your inventory asset account. If you want to create another item, click Next. To save this item and close the dialog box, click OK. After you've told QuickBooks everything about the inventory item, you can add it to a purchase order, bill, invoice or sales receipt, and QuickBooks can keep track of the money every step of the way.

Show transcript

This video is part of

Image for QuickBooks Pro 2010 Essential Training
QuickBooks Pro 2010 Essential Training

69 video lessons · 21741 viewers

Bonnie Biafore
Author

 
Expand all | Collapse all
  1. 8m 19s
    1. Welcome
      52s
    2. Editions of QuickBooks
      3m 24s
    3. QuickBooks bookkeeping basics
      2m 46s
    4. Using the exercise files
      41s
    5. Disclaimer
      36s
  2. 9m 12s
    1. Opening a company file
      2m 4s
    2. Using the QuickBooks menus and home page
      2m 49s
    3. Touring the Customer, Vendor, and Employee Centers
      2m 32s
    4. Navigating between QuickBooks windows
      1m 47s
  3. 10m 50s
    1. Gathering the information you need
      2m 4s
    2. Creating a company file
      5m 33s
    3. Converting from another program
      3m 13s
  4. 8m 19s
    1. Naming and numbering accounts
      3m 36s
    2. Creating an account
      2m 26s
    3. Making an account inactive
      2m 17s
  5. 14m 50s
    1. Creating a customer profile
      3m 40s
    2. Adding customer information
      4m 33s
    3. Creating a job
      2m 18s
    4. Making customers inactive
      1m 39s
    5. Creating a vendor
      2m 40s
  6. 43m 35s
    1. Why use QuickBooks items?
      2m 59s
    2. Creating a service item
      4m 26s
    3. Setting up time tracking
      2m 53s
    4. Entering time
      4m 19s
    5. Tracking mileage
      4m 34s
    6. Creating an inventory item
      6m 7s
    7. Creating a non-inventory item
      3m 34s
    8. Setting up sales tax
      6m 59s
    9. Setting up discounts and charges
      3m 46s
    10. Creating a group of items
      2m 16s
    11. Making items inactive
      1m 42s
  7. 30m 46s
    1. Creating a purchase order
      3m 8s
    2. Entering a bill
      4m 37s
    3. Recording inventory you receive
      3m 47s
    4. Paying bills
      4m 5s
    5. Handling a credit from a vendor
      5m 2s
    6. Writing a check for expenses
      3m 17s
    7. Paying with a credit card
      1m 40s
    8. Paying with cash
      2m 53s
    9. Paying sales tax
      2m 17s
  8. 35m 5s
    1. Understanding invoices, statements, and sales receipts
      2m 23s
    2. Creating an invoice and filling in header fields
      2m 55s
    3. Adding items to an invoice
      5m 7s
    4. Adding billable time and cost to an invoice
      5m 57s
    5. Using subtotals, discounts, and other charges
      3m 6s
    6. Creating an estimate
      2m 49s
    7. Handling a customer credit
      4m 57s
    8. Creating a statement charge
      3m 7s
    9. Producing a statement
      4m 44s
  9. 14m 44s
    1. Setting up print options
      4m 13s
    2. Aligning forms with printer paper
      3m 0s
    3. Printing one or more forms
      4m 29s
    4. Emailing a sales form
      3m 2s
  10. 14m 8s
    1. Receiving a payment
      3m 49s
    2. Assessing finance charges
      4m 9s
    3. Creating a sales receipt for a cash sale
      2m 39s
    4. Depositing payments
      3m 31s
  11. 10m 37s
    1. Preparing to reconcile a bank account
      1m 50s
    2. Reconciling transactions to your bank statement
      3m 14s
    3. Correcting discrepancies
      5m 33s
  12. 9m 51s
    1. Using the Report Center to find reports
      3m 0s
    2. Running a report
      3m 45s
    3. Printing or saving a report
      3m 6s
  13. 6m 8s
    1. Why use journal entries?
      3m 3s
    2. Creating a general journal entry
      3m 5s
  14. 13m 39s
    1. Creating a new user
      4m 58s
    2. Backing up your company file
      6m 10s
    3. Restoring a company file
      2m 31s
  15. 27s
    1. Goodbye
      27s

Start learning today

Get unlimited access to all courses for just $25/month.

Become a member
Sometimes @lynda teaches me how to use a program and sometimes Lynda.com changes my life forever. @JosefShutter
@lynda lynda.com is an absolute life saver when it comes to learning todays software. Definitely recommend it! #higherlearning @Michael_Caraway
@lynda The best thing online! Your database of courses is great! To the mark and very helpful. Thanks! @ru22more
Got to create something yesterday I never thought I could do. #thanks @lynda @Ngventurella
I really do love @lynda as a learning platform. Never stop learning and developing, it’s probably our greatest gift as a species! @soundslikedavid
@lynda just subscribed to lynda.com all I can say its brilliant join now trust me @ButchSamurai
@lynda is an awesome resource. The membership is priceless if you take advantage of it. @diabetic_techie
One of the best decision I made this year. Buy a 1yr subscription to @lynda @cybercaptive
guys lynda.com (@lynda) is the best. So far I’ve learned Java, principles of OO programming, and now learning about MS project @lucasmitchell
Signed back up to @lynda dot com. I’ve missed it!! Proper geeking out right now! #timetolearn #geek @JayGodbold
Share a link to this course

What are exercise files?

Exercise files are the same files the author uses in the course. Save time by downloading the author's files instead of setting up your own files, and learn by following along with the instructor.

Can I take this course without the exercise files?

Yes! If you decide you would like the exercise files later, you can upgrade to a premium account any time.

Become a member Download sample files See plans and pricing

Please wait... please wait ...
Upgrade to get access to exercise files.

Exercise files video

How to use exercise files.

Learn by watching, listening, and doing, Exercise files are the same files the author uses in the course, so you can download them and follow along Premium memberships include access to all exercise files in the library.


Exercise files

Exercise files video

How to use exercise files.

For additional information on downloading and using exercise files, watch our instructional video or read the instructions in the FAQ.

This course includes free exercise files, so you can practice while you watch the course. To access all the exercise files in our library, become a Premium Member.

Join now "Already a member? Log in

Are you sure you want to mark all the videos in this course as unwatched?

This will not affect your course history, your reports, or your certificates of completion for this course.


Mark all as unwatched Cancel

Congratulations

You have completed QuickBooks Pro 2010 Essential Training.

Return to your organization's learning portal to continue training, or close this page.


OK
Become a member to add this course to a playlist

Join today and get unlimited access to the entire library of video courses—and create as many playlists as you like.

Get started

Already a member?

Become a member to like this course.

Join today and get unlimited access to the entire library of video courses.

Get started

Already a member?

Exercise files

Learn by watching, listening, and doing! Exercise files are the same files the author uses in the course, so you can download them and follow along. Exercise files are available with all Premium memberships. Learn more

Get started

Already a Premium member?

Exercise files video

How to use exercise files.

Ask a question

Thanks for contacting us.
You’ll hear from our Customer Service team within 24 hours.

Please enter the text shown below:

The classic layout automatically defaults to the latest Flash Player.

To choose a different player, hold the cursor over your name at the top right of any lynda.com page and choose Site preferencesfrom the dropdown menu.

Continue to classic layout Stay on new layout
Exercise files

Access exercise files from a button right under the course name.

Mark videos as unwatched

Remove icons showing you already watched videos if you want to start over.

Control your viewing experience

Make the video wide, narrow, full-screen, or pop the player out of the page into its own window.

Interactive transcripts

Click on text in the transcript to jump to that spot in the video. As the video plays, the relevant spot in the transcript will be highlighted.

Are you sure you want to delete this note?

No

Your file was successfully uploaded.

Thanks for signing up.

We’ll send you a confirmation email shortly.


Sign up and receive emails about lynda.com and our online training library:

Here’s our privacy policy with more details about how we handle your information.

Keep up with news, tips, and latest courses with emails from lynda.com.

Sign up and receive emails about lynda.com and our online training library:

Here’s our privacy policy with more details about how we handle your information.

   
submit Lightbox submit clicked
Terms and conditions of use

We've updated our terms and conditions (now called terms of service).Go
Review and accept our updated terms of service.