QuickBooks Online Plus has the Inventory feature that tracks quantity, sales revenue, and cost of goods sold. Find out how you can enable inventory tracking, add inventory and edit your product and services by batch.


Some Key points:

  • The value of an inventory item in your books is the amount you paid for it.
  • Recording the purchase of an inventory item increases the value of Inventory Asset account on your Balance Sheet report by the cost of the item and increases the Quantity on Hand units for that item.
  • Recording the sale of an inventory item decreases the value of Inventory Asset account by the original cost of the item and decreases the Quantity on Hand units for that item.
  • Recording this sale also increases the Cost of Goods Sold account (COGS) by the original cost of the item and increases the Sales of Product Income account by the amount your customer paid you for the item. The difference between the income amount and the COGS amount is your gross profit on that item.

At times, you may pay more for some units of a given product than for other units due to price fluctuations. When this happens, QuickBooks Online uses a method called First In First Out (FIFO) to manage the cost accounting as you sell units of that product. For more information on FIFO, see What is FIFO, and how is it used for inventory cost accounting?