Quickbooks - cost of goods - help

[eaze2go]

New to quickbooks, I sell used (garage sale purchased) and used personal items  - do I input a cost of the item I sold into quickbooks as an expense, if so where?  Struggling a bit with quickbooks, any advice on simplifying the process would be appreciated.  I got quickbooks hoping it will be helpful for tax time next year, I consulted with tax guy and they said to do CASH Accounting.  Thanks in advance!

[m60driver]

First, it helps to hire a bookkeeper to initially set up your Quickbooks and explain what is going on.  Second, you probably don't need something as feature rich as Quickbooks.  You can track most of the information you will need for filing taxes by using any basic spreadsheet such as Google Doc sheets.  I use Google Doc sheets and input date of sale, cost of goods, sell price, shipping costs, and fees into a monthly sheet.  Then I use the sum feature at the end of each month on each of those columns and enter the sum values on a separate sheet that tracks monthly totals.  I use another sheet to track expenses such as shipping supplies and also to keep a mileage count.  Your Quickbooks does all this but for a less than modest monthly fee.  There are plenty of videos on YouTube about using Google Doc sheets.

[eaze2go]

Thank you!  I thought quickbooks might be more than I need (received it for free for a year) - I have been using some homemade spreadsheets (numbers IMAC) and keep track somewhat similar to what you described for the last year.  I will see what my accountant thinks.  Thanks again.

[penguins_dont_fly]

@eaze2go 

I'm a QB user. 

I also come from a background of accounting and inventory management --- so I tend to be granular in my inventory accounting 🙂

I use the most basic version of QB Online. This version does not include inventory tracking, so I track my inventory via a Spreadsheet and then do Journal Entries to enter the amounts into QB.

If you have a different version - one that actually includes inventory - you should be able to import your active items directly into inventory and add any items not yet listed.  You can edit the cost of those inventory items in the Products and Services > Inventory. And then when items sell, it automatically makes the COGS entry.

If, like me, you are on the cheapest version, the way I do it might be a bit complicated for you.  Skip down to the ** for the simple way 🙂

I track my inventory ins and outs individually, meaning I have COGS transactions posted for every item that I sell.

When I purchase inventory, how it was paid for determines how I handle it.

If paid for with cash, I create a manual Journal Entry:

Credit from Cash Account

Debit to Inventory Asset

(Take from Cash, Give to Inventory Asset)

If purchased with one of my linked bank/credit cards/Paypal, the transaction is pulled into QB automatically:

When I am reviewing the transaction, I categorize the purchase as "Inventory Asset"

At the end of the month, I make a journal entry for the items I have sold (I upload from an add-on app vs entering it manually):

Credit from Inventory Asset

Debit to Cost of Goods Sold

(Take from Inventory Asset, Give to COGS)

you could  do a lump sum COGS entry or keep track individually. I like to track individually, so my entries are per item sold, one line out of Inventory Asset and one line into COGS

Admittedly, that is a lot of manual stuff.

** If you are on the cheapest version, like me and if you know the value of your inventory at the  beginning of the year and how much COGS you have for the year, you could just do one or two entries.

Do a Journal Entry to Create your Opening Balance for your Inventory Asset Account as of January 1, 2022

https://quickbooks.intuit.com/learn-support/en-us/help-article/journal-entries/enter-opening-balance...

Create another Journal Entry to add whatever amount you purchased in 2022 minus whatever you sold in 2022

New

Journal Entry

Credit Inventory Asset for the amount purchased in 2022

Debit Cost of Goods Sold for the amount sold in 2022

That should leave you with the value of your inventory at the end of the year and be able to report COGS on your P&L and year end reports for your accountant.

[shipscript]

@eaze2go 

I have two accounting methods:

For my "real" business (a corporation), I use a [double-entry] accounting program to keep track of the costs of individual items that I purchase and put into inventory. When I sell an item, that cost is associated with that specific sale to automatically create an expense entry that will offset the income for that item. It is a lot of detail. This type of inventory tracking might be important when an eBay seller is listing on consignment for the benefit of another, and those details would be necessary at the granular level (all the specific details associated with that one single sale). This detail is also important for a company that has product lines where performance needs to be measured.

However, for my eBay and PayPal sales, I use the [single-entry] shoebox method.  eBay tells me what my gross sales were, and also what my fees and shipping were. I take the total of all eBay sales as a single gross value. Then I take the total of all shipping costs and the total of all fees for that year and the total of all refunds, along with the purchase cost of the sold items, not attaching any of that to any particular sale, and use those separate totals to populate my expense columns.

I add my eBay shoebox sales to my corporate return, but could just as easily add it to my personal return. It is only important that the supporting documents are stored in the shoebox should a later audit require backup details.

[pennysdream]

HI there..  

I understand your frustration.  What I did was set up a expense account called Cost of Good.  Left off the S because the equity one is "goods".    It may not be the correct way.  It is my way. 

Just my two cents. 

Penny

[shipscript]

@pennysdream 

Would that be the cost of good will? Like driving a package to the PO because the order came in too late for the morning pickup. Or giving the buyer a discount just because they are taking it to a sick child in the hospital? Or taking extra time to package the item especially carefully because it means the world to the buyer to have one just like the one they remember from their childhood at Grandma's house?  That sort of Cost of Good [will]?

[pennysdream]

No,  I did it way simpler than that.  It is what I paid for the stuff I am going to list.. 

[ziggylab]

I would suggest looking into the difference between cost basis and accrual basis accounting. Corporations use accrual basis and follow GAAP (generally accepted accounting principles) so most accounting software is designed to use accrual accounting. Many Ebay sellers use cash basis accounting, which is much simpler.