Let’s examine how to use QuickBooks Items for tracking cost, price and Profit.
Setting up and using Items on your purchase and sales transactions is how you control the flow of the data to the accounts.
You don’t use an Inventory Item Type unless this is something you stock, count, reorder and manage. You can get similar info for your activities by using Service Item Type, Noninventory Item Type and Other Charge Item Type. These Types have a box to checkmark on the left edge, when setting up this item, to define it as “two Sided.” This provides an Expense account link on the left, for the data flow when you purchase this item, and an Income account link on the right, for the data flow when you sell this item.
You set the Price at what you charge for this item.
You can fill in Cost, but this is only notational. It will be used when you place an order or enter this on a purchase transaction, but you will need to change that purchase for this actual cost. QB offers to update the cost in the set up, but this purchase is where the financial data happens. You can leave the cost at $0, even, since actual purchases create the cost data.
If you leave both cost and price as $0 in the item’s setup, the actual cost becomes the price for Job Tracking (assigning the customer is the direct reaon for this purchase) and Billable purchases. Job Tracking as Billable means QB will offer that to me for selection, when I create a sales receipt or invoice for the customer, so that actual cost is their actual price.
Or, set up a general rate, such as all Lightbulbs are $3 Price to customers, even if you bought one for $1.75 and another for $3.50.
The reports to use for these activities are Sales reports, including Item Profitability and Sales by Item. I like to run the Sales by Customer Summary, changing it to Columns by Item Type and then Columns by Item Detail. Sales by Customer Summary is a flexible report, offering interesting perspectives on your sale activities.