Advanced Quickbooks question: Deposit required on inventory purchase...

[LeeH]

Let's say a company is purchasing inventory (accrual based accounting). They are required to put forth a 50% deposit when they place the order.

How would you handle this? If they just create a bill for 100% of the order it is going to immediately show up in inventory, right? This company may not get the stuff for weeks and it would throw off their physical counts.

They've been using a system where they keep accounts called "prepaid ." They show zero amounts of the inventory item purchased and the correct amount to the prepaid (asset account). That sort of works, but it's a lot of work keeping up with this as it's a pretty good size company. Is there a better way?

[Mule]

Make a bill (like you received an invoice) for what's purchased, pay whatever against that bill. Pay remainder whenever. Done.

[LeeH]

Originally Posted by Mule

Make a bill (like you received an invoice) for what's purchased, pay whatever against that bill. Pay remainder whenever. Done.

If you create a bill it's going to put the entire amount of product in inventory. That's what we're trying to avoid.

[Tidybuoy]

I would think that you would process a bill for the 50% deposit. You're physical counts will be off but wouldn't this be considered "inventory in transit"? You would have to have some way of tracking invoice payments where the inventory has not been received but paid for (as in this case). Basically, physical count + inventory in transit = total inventory.

Another option would be to create a deposit account that groups with inventory. When the inventory is received, you would have to post an entry to transfer from deposits to real inventory.

I used to work for a large retailer and nothing would post to inventory until it was received & processed. However, we had a sophisticated inventory software to handle this. I'm guessing that if you are using quickbooks, this company is somewhat small and unfortunately, you may have to handle some processes manually.

[LeeH]

Yeah... this company is really too big and complicated for Quickbooks, but I don't think they'll spend the money on the sort of system they really need. What they're doing right now actually works, but there are a lot of steps involved and potential for error. I was hoping there was a simpler way that we hadn't considered.

[Mule]

Originally Posted by LeeH

If you create a bill it's going to put the entire amount of product in inventory. That's what we're trying to avoid.

Only 2 ways to do this. Make a bill for the entire group. Receive the items you want to list immediately into inventory. Receive the others at some later point. Or receive everything and set whatever payment terms you need.

[LeeH]

I spent a lot of time today in the sample company playing with this. I really think they're doing it the best way. It's cumbersome, but it works.

[berettafan]

when doing a physical count simply add the inventory not yet rec'd (to your physical count) and this should jive w/ qbks. you SHOULD have a pile of purchase orders that haven't been ck'd off yet. easy-peasy-japanesy!

[cashflyer]

The may be an overly complicated solution for your situation, but I handle mine using the directions included with QB.


To do this task:

Create a purchase order for the items.

Create another current asset account.
Name the account "Prepaid inventory" or a similar name.

Enter charges for the items by:
Writing a check
or
Entering a credit card charge

When QuickBooks indicates that you have an open purchase order for the vendor, do not select the purchase order.

On the Expenses tab of the check or credit card charge, click the Account field. Choose the other current asset account that you created.

Save the check or credit card transaction.


To receive the items
Find the check or credit card charge for the transaction.

On the Expenses tab, select the line that contains your other current asset account.

Go to the Edit menu and click Delete Line.

Click the Items tab.

Click Select PO.

Click the purchase order that contains the items you paid for and then click OK.

If necessary, record additional expenses (such as shipping) on a new credit card charge or check.

Don't add additional expenses to the existing credit card charge or check.

Save the transaction.

Any additional amount owed can now be paid as usual. (Pay Bills)