Cost of Goods Sold & Quick Books

[PIGLEE]

I have never worked with inventory in Quick Books. I have a client that brings be a P & L and a Balance Sheet. I would like to know if I am doing it right, or how do you handle it?

On the P & L there is NO purchases, only cost of good sold. So I put in my tax program the beginning inventory, the cost of goods sold (in the purchases spot) and then the ending inventory. I then adjust the "purchases" so that in my tax program the Cost of Goods Sold matches what is on the P & L.

Have I done it right? How do you handle it?

Jan

[Lion]

Qb

The small businesses I see using QB have a mess of a balance sheet and just put their purchases under COGS since QB has that account already in their chart of accounts. (I try not to work with companies with inventory unless they understand what they're doing and will actually do a physical inventory each year end.) So, what they put under COGS is usually what is Purchases on the tax return. If you have their back-up, you can drill down and see what's there, purchased inventory for resale or raw materials to turn into inventory or.... You may not want to adjust purchases; you'll probably throw off their bank or credit card balances. They may have to refine the number they gave you for ending inventory.

[JohnH]

This may not be exactly kosher, but I sometimes set up an "Inventory Change" account in the COGS section and a corresponding account in the Assets section (more or less like two contra-accounts) I then swap the inventory adjustment needed to reconcile the tax return entries back to the books between these two accounts as needed.

When inventory isn't a hage factor or if it tends to stay within a small range, this works quite well. think an auditor would accept it, although I've never had it tested. After all, in most small companies inventory adjustments balance themselves out year-over-year unless there are write-downs.