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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.