Would this work for work around for FIFO method?
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I have QB Simple Start so I have no inventory tracking. If I count and value year end inventory at the last purchase price (of each relevant item), and calculate COGS (= Beg Invt + Purchases - End Invt), wouldn't that reflect the FIFO method?
Helpful Answer
mike49032,
COGS does not reflect the FIFO method. It is an average of how much you paid for goods and materials held that you eventually sold. When a sale is made, quickbooks adjusts your costs of goods sold by multiplying the quantity sold times the average cost of each item. I hope this clarifies the COGS.
Answer
mike49032,
COGS does not reflect the FIFO method. It is an average of how much you paid for goods and materials held that you eventually sold. When a sale is made, quickbooks adjusts your costs of goods sold by multiplying the quantity sold times the average cost of each item. I hope this clarifies the COGS.
Answer
Thanks for your reply.
In my Simple Start Free Edition, inventory is NOT tracked by Qty.
I created an Inventory (as Current Asset) account and I post any inventory purchase as follows:
Inventory Db xxxx
Cash Cr xxxx
And if there's a return to Vendor I post as follows:
Cash Db xxxx
Inventory Cr xxxx
To calculate COGS for the month I do the following:
STEP 1:
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In a spreadsheet I count and record all ending inventory on the last day of the month at the most recent purchase price. Now I have the total ending inventory value
This = Ending Inventory Cost
STEP 2:
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In QuickBooks I find out what's total of all the debit (purchases)/credit(returns) for the month by running the General Ledger Report for the month concerned.
This = Net Cost of Goods Purchased
STEP 3:
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In QuickBooks I find out what's the beginning balance of the Inventory account for the month concerned
This = Begning Inventory Cost
STEP 4:
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Calculate COGS for the month as follows:
COGS - Beg Invt Cost + Net Purchases - End Invt Cost
STEP 5:
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On the last day of the month (same day Ending Invt was counted and valuated), I make the following journal entry
COGS Db xxxx
Inventory Cr xxxx
Isn't this the correct way to do it?
This is sort of a semi-perptual inventory system, because I post inventory Purchase as and when inventory purchases are made, but I post COGS at the end of the month (periodically).
Any comments on this method?
Answer
If you have a friend or accountant with a copy of QuickBooks Pro or Premier the same year as your Simple Start you can have them open your Simple Start file and turn on inventory. I picked this up from a tip on www.simplestarthelp.com. Once the file is open in pro or premier all they have to do is enable inventory tracking and create the inventory items you need. Since you can't add new inventory items when the file is reopened in Simple Start be sure to create lots of extra inventory items.
