Setting Up Non-Inventory Items
Question: I have my non-inventory items set up in QuickBooks, but I don't see anything in my cost of goods sold account, and my sales numbers seem very low. Why is that?
Answer: Chances are you don't have your non-inventory items set up correctly. This is a common error for our industry, and one of many that make us unique.
About half way down on the left side of the screen for the set-up of the non-inventory item is a little box to check that says, "This item is used in assemblies or is purchased for a specific customer/job." Make sure that this box is checked, as we do indeed purchase goods for a specific customer/job.
When you check this box, the area underneath will expand to reveal both the expense and the income sides of this item. On the left is the expense side, where you should enter your cost of goods sold account from your chart of accounts. And on the right side, enter the sales account where you want the income from your sales to track.
If you don't do the above steps, both the income and the expense portions of this item will go into the sales account—bypassing your cost of goods sold account and netting it out of your sales account—making your sales look less than they are. Your numbers will be correct, but in the wrong accounts.
Please email accounting questions you would like considered for the column to HGatter@AccountingSupportLLC.com with the subject line of "Ask the Accountant."
Harriet Gatter, owner of Accounting Support LLC, was an ad specialty distributor for 23 years and an adjunct professor of accounting at Neumann University. She sold her ad specialty business in 2012, became certified as a QuickBooks ProAdvisor, and now works exclusively with ad specialty distributors nationwide on their QuickBooks, order management and accounting needs.