FIFO quickbooks online

Thanks for posting here in the Community, @amandatni.

I'd be pleased to discuss with you about how FIFO works in QuickBooks Online.

Yes, QuickBooks Online use FIFO so you can keep track of your inventory. QuickBooks Online will always consider the first units purchased (First In) to be the first units sold (First Out) and will adjust your assets and Cost of Sale (COS) accordingly whenever sales of inventory items are entered.

You can record the starting value of your item from the Product and Services section.

Let me guide you how:

1. Click on the Gear icon.
2. Select on Products and Services.
3. Click on New (if you haven't created an Item)
4. Enter the details needed.
5. Enter the price of the item under the Sales price/rate box.
6. Click Save and Close.

I've attached some screenshots below to guide you through the steps:

However, if you've created an Item already and the cost is incorrect, you can just simply highlight the item and select Edit from the action column. Click on the Starting Value to enter the item's correct quantity and cost the save it.

To learn more about this process, you may check out this article: What is FIFO and how is it used for inventory cost accounting?

Also, here are some articles that you may find helpful as you go through the inventory process in QuickBooks Online:

• Set pricing rules.
• How to set up Inventory tracking.
• Inventory.

There you have it! 

Please let me know if you have any other questions about FIFO, @amandatni. I'll be around to answer them for you. Wishing you and your business continued success. 

Hi Betty,

Thanks for your reply.

I just want to make sure.. so if I already have an item, lets say the quantity is 10, with a cost of $12.. but now I received 5 of that item at a cost of $14, I just need to edit the starting value and put it to 15 with a new price of $14? 

Wouldn't that affect my fist 10 items that were at a cost of $12? 

Let me know.

Thanks. 

Amanda

I appreciate the details that you've given, @amandatni.

I'd like to share some clarification with your inventory concern.

Changing the starting value of your item from 10 to 15 and with the cost of $14 from $12 won't affect your previous quantity/cost as long as it has been billed out. Moving forward the information that will show up on your inventory will be the new quantity and cost of the item.

Here's an article that you can read through about editing an inventory adjustment in QuickBooks Online for your future reference: How to edit an inventory quantity adjustment.

That's it!

Feel free to reach back out to me if I can be of additional assistance. Have a great day!

@amandatni 

Does Quickbooks online use FIFO?

YES.

If so, where do I enter the different prices per item?

When you purchase new items at any new prices, just use Item details tab to enter the actual cost you're paying to your vendors. QBO will automatically compute the average cost. No extra steps necessary after that. 

@amandatni 

"I just want to make sure.. so if I already have an item, lets say the quantity is 10, with a cost of $12.. but now I received 5 of that item at a cost of $14, I just need to edit the starting value and put it to 15 with a new price of $14?"

You never edit "Starting Value" or anything else every time you have a new cost.

You just enter the cost in item details tab as they come in (e.g. 10 @ $12 per unit, 5 @ 14 per unit. In QBO Inventory reports, you will see FIFO cost (detail report) and calculated average cost (summary report).

For example, you sold 12 units, you will see the following COGS:

10 units @ 12 per unit = $120

2 units @ 14 per unit = $28

TOTAL COGS = $148

That's how FIFO works in QBO.

If anyone tells you "Changing the starting value of your item" every time you have the new unit cost, they don't know what they're talking about. If you follow that advice, you will be creating a big mess in QBO Inventory and it will be hard to fix later on.

Thank you so much, I appreciate your help!

I'll get back with any additional questions, if ever.

Best,

Amanda

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@BettyJaneB wrote:

 

 

Changing the starting value of your item from 10 to 15 and with the cost of $14 from $12 won't affect your previous quantity/cost as long as it has been billed out. Moving forward the information that will show up on your inventory will be the new quantity and cost of the item.

 

 

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This is completely wrong.

You really should ask for training as to how QBO inventory works

Hi all,

Is there anyone else who can confirm this? I don't want to mess up my inventory and my costs associated. 

Thank you,

Amanda

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@amandatni wrote:

I just want to make sure.. so if I already have an item, lets say the quantity is 10, with a cost of $12.. but now I received 5 of that item at a cost of $14, I just need to edit the starting value and put it to 15 with a new price of $14? 

 

The cost in the item set-up screen is used just once in a transaction, and only if you entered a Qty of >0.  If that is true, a transaction is created that increases the inventory asset account by Qty x Cost, and offsets it to Opening Balance Equity, which is an account that should have a zero balance.  It should only be used as a clearing account when setting up new books for an existing business. After that it should never be used again. For that reason, you should always enter a Qty of 0 in the item set-up screen for new inventory items, once the books are set up.   

You create new inventory by purchasing it, either with an Expense transaction (which reduces Bank) if you paid for the purchase immediately, or with a Bill if you will pay later (which increases AP).

The amount in the Cost field of the item set-up screen is used to populate the purchase, but can be overwritten if the price is different.  It is static, i.e. it never changes.  If you change it nothing happens except future purchases will use this as the price.

When you sell an item QBO looks at the quantities in the opening transaction if there is one and is still on hand, and the previous purchases that have not yet been sold, on the FIFO basis, and uses their respective costs to calculate the COGS, and reduce inventory value 

Hi VP,

Thank you for your help. I appreciate it. Since we're on the topic, I was wondering if you can help me understand a few more thing in QBO:

I was wondering if I also need to expense my inventory even though I created the item in QBO? For example if I purchase 10 items at $100, do I need to create a new expense.. and put the category under "Inventory Asset at $100... and then under "item details" put the 10 items with the new price? Will this update my inventory to add an additional 10 items?  .. If that's the case then do I just not enter the product details?

Thanks

Amanda

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@amandatni wrote:

Hi VP,

 

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You have to use the @ in front

@amandatni 

 

Thank you for your help. I appreciate it. Since we're on the topic, I was wondering if you can help me understand a few more thing in QBO:

 

 

I was wondering if I also need to expense my inventory even though I created the item in QBO? For example if I purchase 10 items at $100, do I need to create a new expense.. and put the category under "Inventory Asset at $100... and then under "item details" put the 10 items with the new price? Will this update my inventory to add an additional 10 items?  .. If that's the case then do I just not enter the product details?

 

Thanks

 

Amanda

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"if I also need to expense my inventory even though I created the item in QBO?"

No. You don't need to that. That's not how inventory works in QBO.

In QuickBooks Online recording an invoice will decrease your quantity on hand for that item. Invoices also decrease the value if your Inventory Asset account. Invoices are posting transactions entry and affect your inventory cost and income account.

How to find out if it's working or not?

If you've created an Invoice, open that Invoice. Click MORE at the bottom and select TRANSACTION JOURNAL. This report will show accounting entry in QBO.