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Invoice no example for Inventory

okay in this video we're going to go through some debits and credits my favorite uh in order to understand quickbooks or use quickbooks you know the most effective ways you really should understand the debits and credits now you don't need to know debits and credits necessarily because quickbooks will tell it to you but you need to be able to understand how to find them so you can know you know oh i debited ar what should be my next step i need to clear that i need to create a credit somehow how do i create that credit right so it kind of helps you to understand the workflow so we're going to go into an invoice and we're going to create an invoice with both inventory and non-inventory parts so we can see the effect so i'm just going to create a new customer okay and i'm going to add an inventory part to this one inventory part and let me make sure that it's positive okay so positive inventory and we'll add five as an example okay and then we're going to go in and add a non-inventory part so we can a non-inventory part a service item you know another charge they all kind of function the same so i'm going to add in one called freight in here now before i add in and save this transaction so freight in will save 50 okay so let's go look at col 1 6 okay this item so this inventory part so we can see when we set up the inventory part we have cost of goods sold as a cost of goods sold account we have revenue as a sales account and we have an inventory account inventory asset as the asset account okay now when we go look at our freight in we have freight in as a cost of goods sold account only right we haven't made it a double-sided item so i'm going to go ahead and make it a double-sided item you want to make it a double-sided item if you can't if you will be purchasing this item as well as selling this item right because if i purchase the item i should be hitting cost of goods sold or an expense account or whatever it is if i sell the item i should be hitting some kind of sales account so i'll call it miscellaneous revenue for freight okay all right so back into invoices so now i have my invoice here and i'm going to save it now let's go see behind the scenes what this does so anytime you have any transaction pulled up in quickbooks you can go to reports and transaction journal to see the debits and credits okay so i'm going to get rid of some of these fields so we can take a peek so what we have happening here now this transaction journal also does not show quantity right it's just showing the total debits and credits so if i needed to add quantity i can come in and add quantity here as well okay so what are we doing here it's saying that we have debited accounts receivable let me get rid of one more of these debited accounts receivable so that means our accounts receivable account went up by 157 dollars and 50 cents okay because a debit means it's going up for ar we have credited revenue for 107 107.50 so that's the sale right of the five ceiling fans so that means that it went up because a revenue account when you credit it makes it go up okay we've also credited an inventory asset account which means it went down okay so it's a asset account when we credit it means it went down right because we're relieving inventory at this time of sale then we also debited cost of goods sold for this inventory part which means the inventory i'm sorry the cost of goods sold went up so a debit to cost of goods sold makes it go up all right so in this transaction alone our sales is 107.50 our cost of goods sold is 50 right so what does that net out to 57.50 in profit for selling this one item or these five items so when you're thinking of debits and credits you always on the balance sheet side so the asset or the accounts receivable you always want to think there's going to be an offset to it so in the accounts receivable case 157.50 the offset is going to be when the customer pays that's when that 150 750 will come out of accounts receivable with the inventory asset right we're crediting it so we're putting it negatives but when did it go positive it went positive when we received the inventory parts in the first time okay so inventory parts affect four accounts it's going to always going to affect ar unless you're using a sales receipt of course but some kind of cash or ar account it's always going to affect revenue inventory asset and cogs okay now when we get down to the non-inventory part down here this is saying that it's affecting cost of goods sold now we had just changed this right so that the account that was being affected was a sales type of account so when i go back to my transactions let's go back into my invoice and take away freight in and add it back in again okay and say 50 and save it again okay now when i pull up my transaction journal again it's hitting my revenue account right it's corrected itself now but on this transaction notice that the non-inventory part doesn't affect a cost at the time of sale right the time when the cost of this would come in is when we received the bill from the shipping company okay so non-inventory parts service items etc only affect accounts receivable and sales there's no cost of goods sold or inventory asset accounts affected on those okay so hopefully that helps to clarify and helps you to understand the debits and credits when you're dealing with inventory and non-inventory parts on a invoice