Many people don’t know that QuickBooks software has what we call “double-sided items”. Because they do not know that double sided items exist, their process goes something like this:
You are an HVAC company and you service and sell boilers. You create an item for the service of the boiler as well as the boiler itself in the QuickBooks item list. You create the boiler item as a non-inventory item and set the sell price to $1000.00. You tell QuickBooks that the income account to hit is “Sales Income”. Now you get a customer that needs a boiler. You buy the boiler and put a bill into QuickBooks and hit “Cost of Goods Sold” in the expense tab of the bill. You create an invoice for your customer and put the boiler item on it. Although this is not wrong, there is a bit of an easier way to do it and a way for better reporting.
Now, here is the easier/more accurate way to do it. When you create the boiler non inventory item in QuickBooks software, you check the box that says “This item is used in assemblies or is purchase for a specific cutomer:job”. (Who knew that meant double-sided?” Now, you will see that a purchase side of the item appears. Now you can fill out the cost side as well as the income side. So you put in your purchasing cost as $250.00 and your Expense Account as “Cost of Goods Sold.” You put in your sales price and Income account just like you did in the earlier example. Now, when you buy the boiler, you can enter a bill and choose “boiler” on the items tab of the bill. Now the first cool thing, is your bookkeeper or data entry person, doesn’t have to know enough about accounting to know to hit “Cost of Goods sold” on the bill. Because the item is already setup to hit that account on the cost side, it does it for you. Also, because we had setup a cost, QB will automatically enter in the cost for you.
Also, now you can run reports that show you the profitability by item. You can now see that you bought the boiler for $250.00 and sold it for $1000.00 therefor profiting $750.00 on the boiler alone.
Pretty cool right?