Items in QuickBooks can be confusing. You may not know where to use them or why to use them, or even which item to use. Most accounting programs don’t use items. The larger, more expensive programs are made up of several modules and you purchase only the modules you need.
For example, you would purchase the general ledger module and then add on only the modules you needed, such as accounts receivable and accounts payable. You would enter your data into these modules into batches and you would post these batches to the general ledger. Quickbooks is a forms driven program and does not use modules, however the process is similar, it’s just that QuickBooks does the posting to the general ledger in the background.
When you enter a bill or an invoice and use the item tab, the items you are choosing have already been set up to post to a general ledger account number. Some items are single sided items, which means they only post to one general ledger account and some items are two sided items, meaning they post to two general ledger accounts. There is no need to post anything else to the general ledger account.
There are several different lists in QuickBooks, but this blog will cover the regular item list. Which items do you need and why?
- Service Item – Once you have setup an item as a service item it cannot be changed to another type of item. Use this item for professional type of work or payment for professional service. You will use an income account for this. If you are going to use this for both income and expense, mark the box that says “this item will be used in assemblies or is performed by a subcontractor or partner.”
- Inventory Part – Use this item to setup your inventory item list. For the expense account use your COS account and for income use one of your income accounts. You also need to enter your inventory account (balance sheet account), reorder point, and on hand amount.
- Inventory Assembly – Use this for inventory items that have been assembled from other inventory items. Your expense account is COS and use one of your income accounts for income. In the Bill of Materials box fill in the inventory items that make up the Inventory Assembly. You will also need to add your inventory account (balance sheet account), reorder point and on hand amount.
- Non-inventory Part – You will use this item for products you purchase but are not going to keep track of as inventory such as office supplies. It would be a single sided item in this case. If you are going to charge your customer or use it in an assembly item then mark the box “This item is used in assemblies or purchased for a specific customer:job”. You will then have to enter both the expense and income accounts.
- Other Charge - Use for miscellaneous labor, material, part charges, delivery charges, set up fees, service fees, etc. You can use this as either a single or double sided item.
- Subtotal – Adding this to your forms will give you a total of the amounts above the subtotal row up to the previous subtotal row.
- Group – Use this item to quickly enter several items at one time on your forms. Give the group a name and in the box list the individual items and quantities to include in this group and save.
- Discounts – Use this item to give your customer a discount on a product or service. Do not use it for a prepayment. You will use an income account for this item.
- Payment – Use this to record payment at the time of the sale. When entered on the invoice it will reduce the amount due. There is no account to set up for this item.
- Sales Tax Item – Use this item if you only pay one tax rate to one taxing authority.
- Sales Tax Group – Use this item if you pay different rates to different taxing authorities for the same sale. The customer will only see the total tax due.
Understanding how your items work in QuickBooks is critical in getting the correct reports from your data. If you do not have the right account number associated with them, your reports will not be correct. I hope I have helped you to understand items a little better, if not please don’t hesitate to contact me.
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Is it possible to not use the items in QuickBooks? It doesn’t work for my husband’s type of business. The previous version of QuickBooks gave me the option to ignore and simply write in the work to be invoiced or estimated.
Thank You
You don’t say what type of business your husband has, but yes, you can invoice your customers without using items if you are invoicing them for reimbursable expenses only. I’m not sure if this is what you are doing. But, QuickBooks was designed to use items to record anything you buy and sell. There are twelve different types of items you can set up. If set up and used correctly you have a powerful reporting tool at your disposal. If you need help in setting up any items, I would be glad to help you.
I was also wondering if there is a way to NOT use the items. Having a garage door business there are so many different factors in the price of one item… EX: one door can be ordered in any size needed, insulated, not insulated, steel backed, vynal backed, with VDS, or without, with any kind of windows, or without, not only that they can be different sizes, with additional hardware, and the list doesn’t stop there. In the long run it would by far be easier to just type out the invoices.
Actually, your type of business is a type of business that can benefit from using items. You can set up to 14,500 items in QuickBooks and group items together if necessary. Sure, it is time consuming to setup the item list, but you will benefit from it in that your data entry on invoices will be quicker and you can run reports by items. If you have items set up as inventory items you can also run various inventory reports. All of these different reports can give you valuable information on how your company is doing and help you with making decisions. Hope this helps you with your decision to use items.
Hi! I stumbled upon this webblog while learning quickbooks. I am the new treasurer for my daughter’s co-op preschool. I have never used quickbooks and the treasurer before me didn’t have a clue and left me to learn it completely from scratch! My job is to keep on track with our budget and track income (tuition, fundraising, art/material fee, fundraising fee) and expenses (Operating expenses-phone, water, trash, building maint., etc.) soooo my question is what would be the best place to start:items, chart of accounts or class, I am a little well actually ALOT confused about the differences and which one would fit our need. Thanks so much for any advice. We have an accountant but he doesn’t help with this part, he only does our taxes!
April
April – The QuickBooks Learning Center has some short videos on how to do different things in the program. You can access these videos by going to Help > Learning Center Tutorials. There are several areas to choose from with several topics within each area. In addition to these videos you can do a search on YouTube for instructional videos by individuals on different aspects of QuickBooks.
When invoicing with an “item”, is there any way to have the amount credited an account other than the assigned revenue account? Such as in a situation when you need to invoice in one month, yet defer revenue to a future month. Presently we have to allow the invoice to post to the revenue account, journal it to deferred revenue, and then journal it back to the revenue account in the future month. There should be a simpler way.
You can set up the item to post to a liability account (deferred revenue). You will still have to do a journal entry each month to move the amount from the liability to revenue, but you can set up a memorized transaction for this.
Hope this helps and Good Luck!
We may have the same item that needs to be coded to different accounts, such as COGS, Warrany, or Fixed Assets. Currently, we setup the same items as many times as needed, selecting the appropriate account code each time. Our purchasing dept is not happy with this process. Is there a better way to have the cost record to the needed account? Our volume is to high for the Accounting Dept to constantly monitor POs for corrections, and needless to say, it is a messy way to work.
My suggestion would be to add some kind of identifier after the item name. For example, you purchase a refrigerator. You could name the item Refrig-Cogs, Refrig-W, Refrig-FA. Code each item to the correct account. If you have duplicate items set up, you can merge them into one. Edit the item you want to rename, say yes to the pop up box asking if you want to merge. Hope this helps.
I have QB online. Where it automatically enters deposits made directly into my checking account register. When I run a P&L, it shows income from Sales (the deposits made at bank) and invoices paid. How do I change the item on the invoices so that they’re not coming up into my income. Which is adding extra income into my P&L. On the invoices, I have “service”. What account (income or expense) should this be categorized as? So it won’t add extra income on my P&L? I hope that makes sense??
Hi Christine,
You don’t want to change the item on the invoice, it needs to post to an income account and show up on the P & L. An invoice will debit accounts receivable and credit an income account. When you receive a payment from your customer, this transaction will debit either your bank account or undeposited funds and credit accounts receivable. When you review your downloaded transactions, don’t accept any transaction that has already been entered in the register. Hope this helps.
Thank you SO MUCH! That REALLY helped me!!
I am entering inventory. If an item previously entered into Item Lists is received and I try to put it Inventory Parts, it says it already exists and asks me to rename. Why would you rename an item that you constantly buy and sell? This hasn’t happened in the past. HELP!
Hi Lois,
You are right in that you don’t need to rename an item that has already been entered. Make sure you are clicking on the down arrow in the item section of the form and pick the item you are adding. It sounds like QuickBooks thinks you are adding a new item rather than increasing quantity on an existing item.
Hi Jo,
I am an accounting clerk at a small business.
I want to link an item with a balance sheet account. When I select the Service item list, it only lets me pick an expense or income account code. If I want to link an item to a balance sheet account (especially receivable account), how can I do that?
thanks,
Hi Daniel,
You cannot link an item to a balance sheet account. In QuickBooks an item is something you have bought or something you have sold. If you bought something you have created an expense. If you sold something, in this case you sold a service, you have generated income. Items are linked to income and expense accounts. Creating an invoice for a customer is how you link amounts to accounts receivable. When you create an invoice, choose the service item to add to the invoice. A debit for the amount of the item will be posted to accounts receivable and a credit will post to revenue.
Hope this helps, if not please ask another question.
Jo Ellen