Inventory Entries for Restaurant

by Edith
(BC)

Transferring Inventory Count To QuickBooks

Transferring Inventory Count To QuickBooks

I would like to know how to transfer inventory totals into my QuickBooks. Inventory is done monthly for the restaurant/pub, but not tracked through QuickBooks. Should the inventory accounts be the COGS type? Also, what account do I put the adjusting entry through? I want it to show on the profit & loss report.

Thank you.



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Hi Edith,

Provided you have the Pro or Premier edition, QuickBooks has an inventory module that is driven from the item list. You will need to turn the module on under Edit> Preferences> Items & inventory. It is necessary to set up EACH inventory item through the item list. If you have any items that are similar, you can use the "Duplicate Item" during setup to speed things along. When setting up each item, you will see a place to enter your opening inventory values at the very bottom under "Inventory Information".

The QuickBooks Purchase Orders will track all future inventory purchases. Inventory must also be received through the QuickBooks inventory module.

Inventory is a balance sheet item. It does not show up on your Profit and Loss report under Cost of Goods Sold (COGS) until a sale is made. The purpose is to match the cost of the good to the sale of the good. QuickBooks Desktop will automatically book your COGS entry when a sale is made using the weighted average cost, in accordance with IFRS and ASPE. (The online edition of QuickBooks (QBO) as well as Sage 50 Premium uses FIFO which is also in accordance with IFRS and ASPE.)

Any adjustments to inventory, such as after the yearend inventory count, should be done through the QuickBooks module's adjustment window. Do not use the inventory window for normal everyday transaction.

Just to reiterate, inventory sits on the balance sheet until the product is sold. When the product is sold, the cost of the good sold is moved from inventory to COGS.

As a sidebar note, LIFO is no longer an acceptable inventory method in Canada; it is still an option under U.S. GAAP.




P.S. I would like to remind you there is a difference between information and advice. The general information provided in this post or on my site should not be construed as advice. You should not act or rely on this information without engaging professional advice specific to your situation prior to using this site content for any reason whatsoever.

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Sep 28, 2015
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starstarstar 		Calculating COGS
by: Hannah

Could you please take a look at how COGS is being calculated at where I work, a distributor company, below and give me your opinion.

We use Sage Simply and a software called "AIMS 360".

At the end of each month, for each division (brand), they add beginning inventory which they get from AIMS to purchase account GL 5004 , and deduct ending inventory from it. As a result, the balance of purchase account at the end of the month in simply is cost of products. for example:

GL 5004 Purchase account:

Dr Cr Balance
May.01 0 - Our acc year is Apr.31
May.22 Purchase 1,000 1,000
May.27 Purchase 500 1,500
May.31 Ending Inv 600 2,100 - I don't understand why they debited End Inv

June.05 Purchase 200 2,300
June.25 Purchase 400 2,700
June.30 Ending Inv 700 2,000 - Cost of Products


on P&L:

Cost of products 2,000
Duty 800
Freight In 450

COGS 3,250


I don't understand why they touch purchase account instead of just adding these figures to get the COGS. The company margin is too high , and I think this could be one of the reasons.

I'd very much appreciate your thought on this. Thank you so much.
Sep 28, 2015
Rating
starstarstar 		Hannah
by: Lake

I'm no inventory expert but ... let's review how periodic inventory is booked:

1. When inventory is PURCHASED, the following entry takes place:

DEBIT (Increase) Purchases (on your income statement)

CREDIT (Decrease) Cash or (Increase) Accounts Payable (on your balance sheet)


2. When inventory is SOLD the basic transaction that gets recorded in your books is:

DEBIT (Increase) Cash or Accounts Receivable (on your balance sheet)

CREDIT (Increase) Sales (on your income statement)

3. At MONTH-END (or year-end), you book an adjusting entry to adjust your inventory sitting on your balance sheet.

You are getting your physical inventory count from AIM360. The entry booked to adjust your inventory balance to match your physical count would be as follows:

To INCREASE your inventory value (to make the books match your physical inventory count), you will make the following entry:

DEBIT (Increase) Inventory (balance sheet)
CREDIT (Increase) COGS (income statement)

Make the opposite entry if you need to DECREASE your inventory value (to make the books match your physical inventory count).

When making these entries, do not confuse your inventory purchases (purchase accounts if you have a periodic inventory system) with your inventory sold (COGS account).

If it were me, I would be booking the inventory adjustment each month to an account separate from purchases to clearly show product sold. (Go to the top of this page and click on the second picture where I show you what makes up COGS on the Income Statement.)

As you can see from these entries, whether the inventory sold account is debited or credited depends on whether they need to increase or decrease the ending inventory balance.

Hannah, you also need to look at inventory on the balance sheet to see what is happening there to get the whole picture.

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