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Setting Up Inventory

Lecture Slides are screen-captured images of important points in the lecture. Students can download and print out these lecture slide images to do practice problems as well as take notes while watching the lecture.

  • Intro 0:00
  • Turn On Inventory Feature 0:43
  • Enter Products Into Inventory 1:44
    • Entering Product Through Vendor Menu
    • Add New Item
    • Reordering Item and Reminders
  • Ordering Products/ Creating P.O's 7:02
    • How to Create Purchase Orders
    • Look Up Outstanding Orders
  • Getting a Report of Purchase Orders 11:34
    • Choose and Open Quick Reports
  • Receiving Inventory 13:47
    • Receiving Inventory Without an Invoice
    • Reviewing the Inventory List
  • Entering a Bill for Inventory 15:59
    • Entering Bill for Received Items
  • Manually Adjusting Inventory 18:31
    • How to Get to the Adjust Quantity On Hand Page
    • Add New Account
    • Check and Review Inventory List

Transcription: Setting Up Inventory

Welcome back to Educator.com.0000

This is QuickBooks lesson: setting up inventory.0002

The first thing we need to talk about is how inventory works with some businesses.0005

If you are in a business that is just a service-oriented business, you may not have to worry about this particular lesson.0010

But, if you are utilizing inventory and reselling that inventory, then, this is a great lesson for you.0017

And QuickBooks is designed to help you manage your inventory and track the number of inventory that you have.0024

So, you do not lose track of what you have on hand.0030

A lot of times in business, if we do not have a good tracking system, it is really difficult to manage our cost.0034

So, setting up inventory, the first thing we need to do is turn on the inventory feature in QuickBooks.0040

And to do this, we need to go to our Preferences page.0047

To get to our Preferences in QuickBooks, well, QuickBooks is open, go to our Edit menu bar and select Preferences.0051

Under that, we want to look at our Items and Inventory and select the Company Preferences tab.0061

We want to make sure that the very first item under Purchase Orders and Inventory, Inventory and Purchase Orders are active,0070

make sure that, that box is checked, and then, we can go ahead and proceed and begin tracking our inventories.0078

Once that is selected, we can then, go ahead and click on OK.0086

And we are ready to begin entering inventory and products into our system and be able to start tracking those inventory numbers.0090

So, the next section that we are going to talk about now is how to enter products into our inventory.0101

A lot of times, we might buy products from a wholesaler and then, turn around and resell it for a profit.0109

The first thing we might want to do is make sure that we can enter in the products that we are selling properly.0116

To enter in the product into inventory, we want to go to our Vendors menu.0122

Under the Vendors menu, we will see down here under Inventory Activities or actually Item List, the very bottom, we want to pull up our Item List.0129

The other way that we can pull up our Item List is by going to Lists and choosing our Item List.0139

But, through this process, we will go Vendors and at the very bottom, choose our Item List.0144

Here, it gives us an entire listing of every product and service that we have to offer in which we are in business for.0152

So, in order to add a new item, let's suppose that we are going to add a new item, under the Activities or actually Item menu0160

button at the very bottom left of our Item List menu or window, we will see the Item button at the very bottom left. We will click on that and select New.0171

If you are familiar with adding things to Items, Lists or the Chart of Accounts, you can always do a Ctrl+N to get to the new Item List.0182

The item that we are going to add is going to be a new inventory part, and it will be an inventory part, so we will select Inventory Part.0193

In the Item Name/Number Field, we are going to type in Cab for short for Cabinet. We will call it 2015.0209

That is the style number. We are going to press tab, and we are going to select it to Subitem of Cabinets.0220

We will select our Cabinets as a subitem.0231

I typed it in. You can always pull the dropdown menu and select Cabinets.0234

The next thing that we want to do is we want to go into the Description on Purchased Transactions,0242

very middle of the page where it says Description on Purchased Transactions, and we are going to type in Kitchen Cabinet no. 2015.0254

We hit tab. Notice that it copies the same information into the Sales Information.0269

From the Purchase Information, it copies it over as the Description of Sales Transactions, as well, so we have that taken care of.0275

Under the Cost section, we are going to say it is $169, and the preferred vendor, we are going to choose Thomas Kitchen and Bath.0283

That is where we are purchasing these cabinets from. It is from Thomas Kitchen and Bath.0298

In the Sales Price field, we want to sell it to our customers for $225- a bit of a mark-up there.0304

We are going to leave the tax code as is if there is a tax there, and at this point, we will go ahead and choose the income account for this.0314

And it is going to be a construction type of income, and it will be in Materials.0327

So, under our Construction Income, we have a subaccount called Material Income, and we will choose that.0332

We will go ahead and hit tab out of that. It will bring us into the Asset Account.0340

And under the Asset Account field, we will just go ahead and make sure that it is an inventory asset, and we will leave it there because that is good.0346

We want to know that when we are down to a certain number of cabinets on this, we want to be able to reorder these.0355

So, it gives us a reorder point. QuickBooks will remind us when we get down to a certain supply number, that it is time to reorder.0363

We will choose that when we have 15 cabinets on hand that it is time to reorder this item.0372

On hand, let's say we already have 20 of those. We will hit tab.0378

And it automatically calculates the $169 cost times the 20 to be a value of $3380 that we have on hand.0384

And then, we could choose the date as of today's date, which is fine.0395

We will go ahead and click on OK to close the New Item window.0400

And we will notice that we now have the cabinet 2015 Kitchen Cabinet, item no. 2015 now added under our Cabinets there.0407

The next thing we want to talk about when we are dealing with inventory is when we get down to an order level,0422

we can go ahead and then, purchase new items.0430

QuickBooks will help us and can help you manage the ordering process, so we can track that, and we call that Purchase Orders.0434

So, a lot of times, we will need to order those products, so we can keep our inventory stocked, and you can actually buy inventory directly.0444

Instead of using the Purchase Order system, you can actually buy it direct.0454

by cutting the check and putting it right into Inventory and bypassing the Purchase Order system.0458

But, by using the Purchase Order system, you can keep track of what pending orders you have,0465

what pending items you have actually already have and you are waiting for to come in to replenish your inventory.0471

So, it is really a nice helpful tool that QuickBooks has is utilizing Purchase Orders.0478

The first thing we want to do is look at the Purchase Orders.0484

And QuickBooks will actually automatically generate a Purchase Order number for you to use if you need to for your vendors.0488

So, in using the Purchase Orders, we are going to show you how to create a purchase order.0495

From the Vendors menu, we are going to choose Create purchase orders.0503

So, this is now that we want to go ahead and order some items that we are low on.0513

We want to replenish our stocks, so we can continue selling that product.0517

We are going to open up a new purchase order, and in the Vendor field, we are going to type in Perry Windows And Doors and click on tab.0522

It will go ahead and fill out the Vendor Information, and then, we can go right into the body of the order number.0532

It, kind of, looks like an invoice set up in the same way.0539

In the Item column, we can go ahead and type in Frames or Exterior Frames, so I am going to choose under here Exterior.0543

If you do not have that in your sample, if you type it in, you can actually add that Exterior Frame into your sample.0553

But, I am going to type in Exterior Frame, actually, Frame and choose the Exterior Frame that is in the sample setup.0563

Again, if you do not have it, you can choose something else to order, but in this sample with my company file, we have an exterior frame.0573

You can go ahead and order cabinets or something else that will suit you.0581

Under the Description, we will just go ahead, and we could type in Exterior Frames, or maybe the item has already prefilled that for you.0584

In my case, mine did not put in a description for that, but we want to go ahead and order, say, ten of those items.0595

When we hit tab, it will automatically calculate how much we need to pay our vendor.0604

Under a Vendor Message, we could type something special if we would like. We can say Please rush ship this order.0613

And that, kind of, indicates to our vendor that we would like this rushed ship.0628

When we are done with filling out the items that we are ordering from that particular vendor, we can go ahead and click Save and close.0634

Now, what will happen is that QuickBooks will add an account under our Chart of Accounts called Purchase Orders.0643

And with that, under the Chart of Account with Purchase Orders,0653

we should be able to then look at and see the amount of orders that we have outstanding.0657

And it is a non-posting account that QuickBooks uses, and it will not affect your balance sheet or income statement, and it is a purchase order account.0665

It is also used to produce quick reports that will show us the current purchase orders that we are ordering already and that have not shown up yet.0674

So, we are having pending orders or pending items that we are waiting for, that we have ordered from our vendors and we have not paid for as of yet.0683

Now, we want to go ahead and do create a report of purchase orders and see what outstanding items we actually have.0694

When we look at that, we can go to our Lists menu, and from the Lists menu choose our Chart of Accounts.0705

And then, we should be able to look down here and find our Purchase Orders.0715

Since we just created a purchase order, we should be able to find a purchase order here.0725

It is down here at the very bottom. I found mine under the 9000.0754

It is called Purchase Orders. If I highlight Purchase Orders down at the bottom, then, I can run a quick report.0758

In order to run a quick report there, I will just go ahead and select the bottom of the Chart of Accounts window, Reports and choose Quick Report.0765

And then, we will not open up a quick report for that particular chart of account.0776

And it will list all of the purchase orders that I have outstanding in the report.0782

And now, I can see what I am waiting for, and there is Custom Kitchens and etc.0788

So, we can look down, or I can scroll down and look at my latest one from Perry Windows and see there is my ten items that I am looking for at $200 each.0797

So, I can see those Exterior Frames that I have ordered from Perry Windows.0810

I can close the window by clicking on the red X now that I have my quick report done, and I am happy to see what I am looking for.0819

Once we receive, after we make our purchase order, and the vendor sends us our product, we could then, receive that product.0828

A lot of times, we will get the product first, and maybe the invoice is to follow.0837

So, we are going to go ahead and receive the inventory without an invoice.0841

I am going to close down my windows. A quick way to do that is by clicking Window and Close all.0846

And so, once we get that product in, we are going to receive that product into our inventory.0851

From our Vendors menu, we are going to choose Receive items because we do not have the invoice yet, but we have the product in hand.0856

The first thing that I want to do is I am going to type in Perry Window for the Vendor that we are receiving product from.0873

And it gives us a little message saying Open purchase orders, that there is open purchase orders that exists for this vendor.0882

Do you want to receive against one of the purchase orders, and yes we do, so we are going to say Yes.0888

At that, we are going to look at the order number that we just placed. This is purchase order no. 40.0896

That is the one we just did that had the ten items at $200. I am going to click OK on that once I select it.0903

It will pull in that purchase order information, and it gives me those frames. It gives me those ten items that we collected there or actually ordered.0913

It says $200 as the cost.0925

So, once we receive it in, it is now going add those to our Inventory. Once I hit Save and close, it will not add it to our Inventory.0928

If we want to look at that, we can click on Lists and go to our Item List and go down to our Exterior Frames.0936

And we will notice that our Inventory has increased.0946

We could Save and close on all that, and that is how we receive inventory.0953

But, now, once we receive our inventory, when we have increased the number of items that we have ready to sell, we receive the bill.0958

And now, we have got to pay for it.0966

So, we are going to go ahead and enter that billing against that purchase order or against the item received.0967

What we want to do is now that we have the bill, we want to receive that bill for that particular inventory.0975

In order to do that and attach that bill to that receipt, we are going to go from the Vendors menu, and we will say Enter bill for received items.0982

So, of course, we can receive the items and enter the bill at the same time.0993

But, this case, we received the items and then, received the bill later, so we will say Enter the bill for received items.0998

In the Vendor field, we will pull down our Perry, so I am going to type in Perry Windows and Doors.1008

It is going to pull up a bill here, and we are going to look at that, and we will choose the very first one, which should be that one that we had.1014

It is Bill to follow, and we will say OK, and it should pull up the ten items. That is not the one I wanted, so I am going to clear this particular one.1028

I will not revert it. Get out of there.1040

I will do it again. It has got to be the second one, so under Enter bill for received items, when I do Perry, it is going to choose the second one.1044

And that should be the one that is our $200. There is the one we just entered for $200.1053

So, I chose the proper purchase order, and if I had a memo in there, I would have identified it a little bit better.1059

Right here, we chose the right one that is $200 that we are going to owe to our vendor.1068

It pulls it in. There is the bill for $200 that we owe them.1074

We will click Save and close, and it says You have changed transaction. Do you want to record your changes? Yes, we do.1078

And now, what happens is it goes ahead, and it creates an accounts payable, a credit, that we owe $200 to Perry.1086

And it also creates an asset of $200 to our Asset Inventory, and that is what QuickBooks is doing in behind once we can get that taken care off.1093

Now, the next section we want to do is we are going to now manually adjust inventory.1107

Sometimes, at the end of the month, we might have lost, maybe damaged goods of some sort, maybe a cabinet was broken at some sort up.1114

So, we need to adjust our inventory at the end of the period. This happens unfortunately, too often in some businesses.1124

And we want to minimize that, and that is why we utilize the inventory tracking1131

in QuickBooks to help minimize loss and damage of our items or goods for sale.1135

So, in order to manually adjust our inventory after we do a proper count at the end of the period,1143

we want to do a manual count, and when we see that our QuickBooks information and inventory is slightly off, we want to adjust that.1149

I am going to close all my windows here, and I am going to open up my Home screen by clicking on the upper left icon bar and choose Home.1158

And here is my Home screen here that shows me my little flow chart, but notice in the upper right of my Home screen is Inventory Activities.1168

The first thing I want to do is click on the right arrow there and look at the Adjust quantity value on hand.1180

So, we are going to choose that activity of the Adjust quantity and value on hand.1188

The first thing we want to do is leave it on today's date.1196

In this case, it says 12-15-2006. It gives us the adjustment account that we can put in Miscellaneous.1200

But, in this case, we are actually going to type in Inventory adjustment.1208

I want to hit tab, and it says Hey, you want to set this up? Yes, I do.1220

I am going to set up this account because it does not exist yet. This, I am going to assign it a number, Inventory Adjustment.1223

What is the cost? No, 6600-01, and that should be sufficient to set up this particular account.1239

And it gives us the Add new account for Chart of Account. Chart of Account, new, and I am going to put an assignment of a number.1252

If you are not utilizing Chart of Account Number, you do not need to worry about that.1258

But, I put in a number. Hopefully, it is not duplicated, and I have chosen 6600-01.1261

I will make sure that the name is Inventory Adjustment, and the account type is going to be Expense, so it is an Expense account.1269

So, I will choose Expense. Make sure that it is typed in properly.1294

It is an Inventory adjustment account, and I am going to say Save and close.1298

And now, we have a new item, Adjustment account called Inventory adjustment.1304

Now, I am going to go ahead and in the Quantity, under the Item, I want to choose Interior Doors.1310

It is a wooden door, but I want to choose an interior door that we are going to adjust after we checked it out1321

that we noticed that we have a different value on hand, and we have two left.1329

So, in the Quantity different, I am going to say I have got -2, so it is going to put in a new quantity of 45.1336

I could always put in the new quantity of 45, and it would calculate that we have -2 either one way or the other.1345

But, we have only 45 of those interior wooden doors. I hit tab, and it looks at the value adjustment.1352

It is going to create an adjustment to the value of our inventory assets of $139.79. It is going to adjust things for.1360

So, once I have got that done, I have my new quantity amount. I click Save and close.1372

And if I can check it, I can go ahead and say Lists and look at my Item Lists and go down to the wooden doors.1377

And under the wooden doors here - oops, where did they go - Interior.1387

I should have 45 on hand instead of 47, so that has been taken care of properly.1393

That is how we manually adjust the inventory, and that is how we set up our inventory for QuickBooks.1402

Hopefully, this lesson has given you a little bit of a start so that you can begin tracking your inventory on a regular basis.1407

I encourage you to do a regular manual inventory counts and reconcile them to your1416

QuickBooks as often as you can at least quarterly if not monthly preferably.1422

Thanks again for visiting Educator.com. We will see you next time.1427