QuickBooks Asia

Setting up selling price for items to be inclusive of GST

Software: QuickBooks Canadian version

QuickBooks does allow user to set their selling price to be inclusive of the GST. If occasionally you need to include your selling price with GST, during the preparation of Invoice, you can simply select the checkbox “Amounts include tax” in your Invoice window.

However, if permanently you need your selling price to include GST, then, you have to set it up in both your preferences and item profile.

In your Sales Tax preferences window, under Company Preferences, you can set “Allow tax inclusive (gross) prices and costs to be entered”. Next at the item profile, you can set your prices to include Taxes by selecting the checkbox for “Amts Inc Tax”.

Now, whenever you sell this item, the price shown in the invoice window will be inclusive of GST.

Adjust value of stock on hand in QuickBooks

Some years back you purchased some stock item, B221, for a project. After the project ended you still have about 192 units of B221 left in store. You bought this item at a cost of $245.00 per unit. Now, the market value for this item dropped to about $220.00 per unit. So, how can you adjust your stock value from $245.00 per unit down to $220.00 per unit to reflect an accurate stock assets value in your financial report?

Assuming you wanted to adjust the stock value as of 30 Sep 2010, and on this day there is no movement of this stock item.

First, you need to add a new expense account; usually I name it as ‘Stock Adjustment Expense’ account.

Next, from your item list, click the ‘Activities’ button and select ‘Adjust Quantity/Value On Hand feature.

 

In the Adjust Quantity/Value on Hand window, check the check box for Value Adjustment (lower left corner), so the New Value column will be shown on the Window. Since there is no change in quantity, you can enter 192 in the New Qty column. The total value now should be $42,240.00 ($220.00 x 192 unit); therefore, you should enter 42,240.00 in your New Value column.

Total value adjusted for this transaction is 4,800.00, that is, 245 – 220 = 25 x 192 units = 4,800.00. It will debit Stock Adjustment Expense account (Profit and Loss report) 4,800.00 and credit Stock Assets account (Balance Sheet report) 4,800.00.

Click the Save & Close button to complete the Stock Adjustment transaction.

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Understanding QuickBooks Inventory (Stock) Module

To use QuickBooks inventory module, first, you need to turn on the inventory module. To turn on the inventory module, you go to Edit menu, select Preferences. From the Preferences Window, click on the Item and Inventory icon on the left side of the Window to get into the Item & Inventory preferences. Next, go to Company Preferences tab; check the check box for Inventory and Purchase Orders are Active field. Click the ‘OK’ button to save your setting.

When you add an inventory item into your item list, there are three accounts you need to associate this item with, they are COGS account (Cost of Goods Sold), Income account and Asset account (Inventory).

When you purchase an inventory item from your supplier, example: ten units of Item 123 at $100.00 each, the double entry for this item will be:

    Debit: Asset account (Balance Sheet account) at $1,000.00

    Credit: Accounts Payable (Balance Sheet account) at $1,000.00

At this stage, the transaction is only between Balance Sheet accounts (Inventory Asset account and Accounts Payable account). Therefore, you will not able to see this transaction as a ‘Purchase’ (Cost of Goods Sold account) in the Profit and Loss report.

When will it affecting the Cost of Goods Sold account?

When creating an invoice for the Item 123 (example: you sell five units at $150.00 each), the double entry for this invoice will be:

    Debit: Accounts Receivable (Balance Sheet account): $750.00

    Credit: Sales account (Profit and Loss account): $750.00

    Debit: Cost of Goods Sold account (Profit and Loss account): $500.00

    Credit: Inventory Asset account (Balance Sheet account): $500.00

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How to create opening balances for Accounts Receivable?

There are few methods of creating opening balances for Accounts Receivable account. The methods are:

• Entering opening balances (lump sum) directly into the customer profile.
• Entering opening balances via General Journal entry.
• Entering opening balances via invoice.

The first method, entering opening balances directly into the customer profile page, is good for user who needs to create the opening balances fast; thus, they enter the opening balances as a lump sum (total amount of all the outstanding invoices) into the Opening Balance field of the Customer Profile page.

The disadvantage of this method is that you have to track the payment received for each individual invoice manually.

The advantage for entering opening balances of Accounts Receivable via General Journal is user can record the outstanding base on per customer per invoice amount. You can record every outstanding invoice as a General Journal transaction. In this way, QuickBooks can help you manage the payment for your invoices.

However, General Journal method does not show the invoice number and the transaction type name ‘General Journal’ will be show in the Statement.

The last method, enter opening balances via invoice is a better method that I preferred. Other than allowing you to capture the individual outstanding invoice, it captures the invoice number as well. This will help when printing Statement for customer. Besides, we can see the historical link between the payment received and the invoice.

To use this method first you have to create a new item for opening balances. Item profile:

    Item type: Other Charge (or Service)

    Item Name/Number:  Opening Balance

    Description: Opening Balance

    Account: Opening Bal Equity account

You need to use this item, Open Balance, for all your outstanding invoices.

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