How to record cost of goods sold in QuickBooks Online

How to record cost of goods sold in QuickBooks Online? 2024

Cost of goods sold in QuickBooks Online will help you to be conversant with the actual situation of your business. QuickBooks Online automated this process, which facilitates cost tracking and bookkeeping.

Understanding Cost of Goods Sold(COGS)

Before one gets into QuickBooks Online, let me take a look at what is meant by COGS. The COGS comprises the direct costs traceable to the manufacturing of merchandise that your business sells. It embraces costs such as raw materials, direct labor, and manufacturing expenses. Proper recording of COGS facilitates computation for gross profit and an overview of how efficient production processes are.

Creating account of Cost of goods sold in QuickBooks Online

PR – Create a COGS Account

Log in to QuickBooks Online:

Login into your QuickBooks Online account.

Global Create: On the left-hand menu, click “Accounting,” then “Chart of Accounts.”

New Button: Click the “New” button in the upper right.

Account Type: Click the dropdown option on “Account Type” and from the list provided, select “Cost of Goods Sold.”

Detail Type: In this dropdown, you select the type of detail this account will be. You can have “Inventory Shrinkage” or “Direct Costs.”

Name Account: You can name this account. You may name it “Cost of Goods Sold” or other titles that best fit your business.

Save and Close: By clicking “Save and Close,” you shall have created this account.

How to Set Up Inventory Items

Sales Menu: Click the “Sales” menu, and then click “Products and Services.”
New Item: On the top left, click “New,” then click “Inventory Item.”

Item Details: Name the item, and fill in description and quantity. Fill in the “Cost” via the dropdown option selection of an appropriate COGS account.

Save and Close: Click “Save and Close” to save your entries.

Recording Transactions Involving Cost of goods sold in QuickBooks Online 

Recording Sales Transactions

Generate Sales Receipt or Invoice: via menu click “Sales” then either “Invoices” if this is a credit transaction or “Sales Receipts” in case of an immediate transaction.

Enter Sales Details: Detail the customer details, date, and what is being sold. Allow QuickBooks to auto capture revenue and corresponding COGS on items that are being sold.

Save and Send: Click on “Save and Send” to complete this transaction.

Recording of Purchases

Click Bill or Expense: In the case of inventory or material purchasing, click on “Expenses” and then select either Bill or Expense.

Fill in details: Give the details of vendor, date, and amount. If it is a direct purchase related to production cost, then in “Category,” select the COGS account.

Save and Close: After filling in the entry, click on “Save and Close.”

Adjusting Inventory

Inventory Adjustment: On the menu, click “Sales,” and under that, click “Products and Services.” Find the inventory item for which an adjustment is required.

Adjust Quantity: Having located the item in inventory, click “Adjust Quantity/Value” and complete the appropriate quantity or value adjustments. If this adjustment is not directly to be done from the item, select an adjustment account.

Save Adjustment: Clicking on “Save and Close” finishes the activity.

Other QuickBooks Online Aspects to Enhance Your Bookkeeping

QuickBooks Online boasts robust reporting, which helps in monitoring your financial metrics. Run a Profit and Loss Statement or an Inventory Valuation Summary that has been customized to summarize the overview of COGS and general financial performance.

Run Reports: Go into the “Reports” section and customize reports for period or category details. This allows a deep look at cost trends and profitability.

Budgeting and Forecasting

Create Budgets: Through Cost of goods sold in QuickBooks Online, one can create budgets and forecast future expenses and revenues. The feature will enable you, hence, to strategize the financial course and monitor actual performances against the budget.

Access Budgeting Tools Access via menu “Settings,” then “Budgeting,” and create new budgets for different periods and categories.

Adaptability with Other Tools

Cost of goods sold in QuickBooks Online also integrates with a slew of third-party applications to enable and embellish the functionality of QuickBooks. You might integrate, for instance, Commerce websites, payroll providers, and CRMs with QuickBooks to make certain all financial information flows properly.

View Connect Apps In QuickBooks Online click on Apps in the left navigation bar to view, search and connect apps to use in your business .

Tax Compliance and Filing

Taxes tracking: QuickBooks Online allows tracking of sales taxes, preparation of tax reports to ensure the company complies with all its set policies concerning taxes. This includes setting up the sales tax rate and printing all the reports relating to taxes.

Get Ready for Tax Season: You would go through your tax reports, export to a spreadsheet for ease of filing, and make sure you have everything your accountant or tax preparer needs to file your taxes.

Conclusion

The recording of the cost of goods sold, for sure, will be made pretty straightforwardly. This COGS entry would be quite crucial for you in maintaining the record correctly and letting your business know about cost efficiency. Setting up the correct COGS accounts, recording the transactions adequately, and using other salient additional features of QuickBooks will further help in achieving optimization in bookkeeping and making more rational financial decisions in Cost of goods sold in QuickBooks Online. Cost of goods sold in QuickBooks Online puts at your fingertips a complete suite of tools that will enable your business to stay on top of its financial health and be better positioned to execute growth and compliance.

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