How to Use Items in QuickBooks 2019 – Part 1 and 2

Watch QuickBooks video tutorial below and we will talk about how to use Items in QuickBooks 2019. We will give you an overview of the types of items and show you how to set up service items. Then, we will continue our discussion on working with items and how to set up more items such as inventory part, other charges, subtotal and group.

We have made it all the way down now to module six. In this particular module, we’re going to talk a little bit about how to work with the items featured in QuickBooks and how to work with the inventory feature in QuickBooks.

We are going to start with section one which is Working with Items. There is a part two. Make sure you watch both of these so that you can totally understand how items work. Let’s go ahead and get started! I will show you how to work with items and inventory.

If you remember, in the very beginning when we entered our estimate we had actually worked with the list of items where we had picked some framing and we had also picked an exterior wood door. That’s the list, I want to talk to you about.

Here’s where your items and services are located right here. Sometimes you purchase items and sometimes you actually sell items and that’s where this list is set up.

Let me talk to you about the different types of items you can have and then we’ll go through and set a few of these up so you can see how these work.

You’ll notice that the first type are what we call service items right here and think of a service as some service you provide. Framing is a service you provide. It’s not a physical part.

Below that, you’re going to see that there are actual inventory parts. If you remember, we had actually put a wooden door, an exterior wood door on our estimate that we created.

Inventory parts actually have a total over in this column here. You will always know how many you actually have on hand. Any time you actually put a wood door on an invoice. This number will decrease because you’re selling it. If I happen to purchase these wood doors this number will increase because I’m buying them. That’s how that works! That’s an inventory part.

Below that you have non-inventory. Non-inventory is physical items that you might buy or sell but you don’t care to track how many you have in the backroom. Think about nails. Do you want to count that you have 1,601 nails in the backroom? Probably not or think about it this way. Maybe you have rental property and you’d like to be able to run a report at any time to see how many refrigerators you had to purchase for these properties. You don’t really keep those as inventory. You just need to track how many you have.

You’re going to see below the noninventory type that you’ll have what we call Other Charges. You’ll have bad debt. You’re going to have a delivery charge. You’ve seen a few of these already. Below that you’re going to have what we call subtotals.

Subtotals are a great way to actually segment parts of your invoice. For example, let’s say you put in four or five different line items and you want to subtotal them. You would just add this subtotal right here as line six and it will automatically subtotal anything above it.

You can keep entering some more items below that subtotal and then subtotal as often as you want. So, it’s a great way to keep sections of items together on one invoice.

Below that, you’re going to have groups. Let me give you an example of a group. Let’s say that you build houses and you have three different house plans. You might have groups called House Plan A, B, or C.

In each one of those, you might have a hundred different items from this list that are part of that particular group. You can set up the group, so these are prepopulated when you pull them onto an invoice and you can edit it at any time if you like. It’s a big time saver when you need that!

You’re also going to have a type called Discount. If you wanted to actually enter several items of your invoice and then enter a discount below it you could use this one.

You can also use the prepayment or this payment option that you see here as well and you could use those if someone paid you and you wanted to put that payment on the actual invoice itself.

Now, I personally don’t like to do that because I like to put the entire invoice in. Then, enter the payment as a separate payment so that you can see the original amounts of both but you do have the option to do that.

Below that, you’re going to see sales tax items and then you’re going to see a sales tax group at the very bottom. So when we get to the module where we talk about sales tax you’ll see how those work. But those are the different types of items that your inventory or your items you’re setting up can be.

I want to go through now and just look at a few of these, and show you how to set them up, and what types of things you’ll need to tell it and something else I just want you to pay particular attention to.

If you notice in this account most everything here, not all, point back to an income account. And that’s what you want to do. Let me go ahead and show you a few so you can see how this works. We’ll look at framing as an example because you’re familiar with this.

Now, since framing is already here I’m going to double click to edit it. I could right click to edit it this way, or if it was a brand new item I could click New. I’ll go ahead and edit. You can see that when you’re creating an item the first thing you have to do is tell it what type of item this is.

One of the very few things in QuickBooks you cannot change is noticeable right now, I cannot change this from Service to Inventory, as an example. If I decided I had set it up as the wrong type. I would want to make it inactive or delete it if I could. Then, I would go back and set it up the correct way.

You’ll notice the first thing I have to do is tell QuickBooks the name of the item. When you’re naming your items, you can name them anything you want because remember that your customer is not going to see what you’ve named the item. They’re actually going to see what you have in this description field right here.

This is not a sub-item of another but let me give you an example of what a sub-item would be. I’m going to flip back to the item listing for a second. If you notice cabinets, for example. That’s the main item. Cabinet poles is a sub-item of cabinets. That’s how that would work. Alright!

I could also set a unit of measurement. Here’s what this means. If this is something you sell by the foot, by the yard, by the case, you could go ahead and hit Add New and create a list where you could pick from the dropdown.

So, when you’re actually entering framing on an invoice and you come to the unit of measurement column, you could pick Hourly, for example, and it would know that this is something you do by the hour.

Here you have a description. You can see here! They have Framing labor but I can make this description as long or short as I need it to be.

The rate. This is what I charge for one of these. If you have a particular item that you charge something different every single time, just leave this on zero and then every time you invoice you can actually type that in.

Right here, it says Tax Code and you can choose taxable sales or not. This has to do with sales tax. When we talk about sales tax, you’ll find that some items are taxable or not and so are some customers as well. And this is where you would tell if this item is subject to sales tax or not.

And then, the most important thing in this entire window is going to be right here, this account. Remember how I showed you a second ago that most everything points back to an income account.

Here’s a prime example right here. This means when I put framing on an invoice that means I will be selling it to my customer and it will be income to my business. If you start running reports and they just don’t look right it could be because you picked the wrong type of account on this screen here. So that’s really, really important!

I’m going to go ahead and click OK and that was framing.

What I’d like to do now is go ahead and stop the video because I want to show you how to set up an inventory part. So let’s go ahead and flip over to the second part of Working with Items.

How to Use Items in QuickBooks 2019 – Part 2

We are working in module six and we’re currently talking about how to work with items. We’ve already looked at part one where we went ahead and looked at a service type item. I want to take some time now and talk to you a little bit about some of the other types of items that you’re going to find in QuickBooks.

I want to create a new item. It’s going to be a screen door and it’s going to be an inventory part. All I have to do, anywhere in the list, I’m going to right click and choose the New option.

The first thing it asks is what type of item is this. Let’s say this is an inventory part. And then, we’re going to actually put the name of our item right here. Now, when you’re naming your item you can name it anything you want to. Because, remember that, your customer will not see whatever you name your item. They’re actually going to see the description.

The next field is your sub-item of. So if screen door was a subitem of another item I would check the box and then pick the item that it’s a sub-item of. In this case, it’s just a regular item.

There is a place to put the manufacturers part number. This is really just for you! So that, you have it on hand when you go to order the item.

If this is sold by the foot, by the yard, by the case you could set up a unit of measurement. You would just choose Add New and set that up.

Now, here’s what’s a little different in this case. Anything you see under the Purchase Information on this area, this is when you buy the item. And over here, this is when you sell the item.

You’ll notice the first thing it asks is for a description on purchase transactions. I’m just going to put screen door, but this could really say anything you want it to say. It’s generally going to say, a description based on what your vendors description is. This description over here is when you sell it. They can be the same or different.

On average what do you pay for this? If it’s totally different every single time just leave it on zero. The sales price is what do you actually sell this for? And again, if you sell it for something totally different every single time just leave it on zero.

The cost of goods account, do not change this because that is the account that this goes into when you purchase it. You can set up a preferred vendor if you’d like as well. We’ll say Pelican Building Materials.

And back over on the sales information side, is this item subject to sales tax when you sell it? And the next thing is which account would you like this to point back to? Now, here’s something to notice. This says Income. That means pick an income account here. We’ll just say in this case that it goes back to materials income.

Do not get hung up on the cost and the sales price. Nothing actually happens at this point as far as the numbers go. You’re only going to see numbers pull onto reports when you actually purchase these or actually sell these. This is just really for ease of use for you so that you can pull these in and have it prepopulate automatically for you.

Down at the bottom, you’ll see the asset account. When you actually have screen doors in the backroom, they’re considered an asset to your business. You don’t want to change the account that populates here automatically.

Just leave it right where it is and then you can set a minimum re-order point and a maximum re-order point. This means when you get down to what number, maybe two, do you want to pop up and tell you that you need to purchase some more. Then the flip side of that is you don’t want to get too many in the backroom, so you might say a max of ten. If you get ten then, it warns you! So, that you don’t buy any more.

Then, we’re going to tell QuickBooks how many we currently have in the backroom. That would be on hand. We’ll just say there’s two. You’ll notice it’s taken the cost of $100 times number two and given you a total value. And that’s as of today’s date.

That’s all you have to do for inventory parts. I’m going to click OK and let’s see if ours is in the list. Here’s our screen door and you can see that there are two of those right now in the back.

There’s a few more on this list that I want to talk to you about. Let’s go down to where the other charges are. One of them that we saw a little bit earlier was this one called Bad Debt, it’s the Other Charge.

These are miscellaneous type things. I want to double click on this one to show you how to set this one up.

Make sure that when you set this up the type is the Other Charge. This one is named Bad Debt and they have a description, “Bad Debt” or write off amount.

Now, there’s not going to be a percentage or an amount here because it’s going to be different every single time and it’s not going to be subject to sales tax.

Now, here’s the key to the whole thing working. You need to set up an expense account called Bad Debt to put this to. So, even though the item name is the same as the account name that’s okay! Because they’re in two different lists and it’ll work just fine. That’s how you’re going to set up the bad debt.

The other thing I wanted to show you is the subtotal that I mentioned down near the bottom. If I double click on Subtotal make sure the type is “Subtotal”. That’s the key to this whole thing working. You can see the only other things you have to fill in are the item name and the description.

We’re going to be talking about groups and about sales tax in a later module so I’ll hold on that, but that gives you an idea of how items are set up and how they are used.

Let’s go ahead and wrap up this video and we’re now going to go into section two and talk a little bit about working with purchase orders.

Cindy McGuckin

Cindy McGuckin is an IT trainer with over 20 years of experience. Cindy currently manages the IT Training Department at Trident Technical College, she's a Member of the Association of IT Professionals, Charleston, SC chapter and the Treasurer of the South Carolina Association of Continuing Higher Education.Cindy is a Microsoft Office and QuickBooks expert and her online courses have received hundreds of 5-star reviews. Her no-nonsense approach to teaching complicated topics makes her classes engaging and interesting.