Understanding List Categories in QuickBooks

 

List categories is a misunderstood area of QuickBooks, here are some hints and explanations.
ITEMS List   

If you invoice your clients you will need to setup items. You will need one item for each sales account you have setup in your chart of accounts.
Item Types

The item type you choose depends on what you are invoicing.

  • Service
  • Parts – those you use as inventory and those you don’t
  • Other – such as shipping or travel
  • Subtotal
  • Sales tax and discounts

All of the types use a name. This name is what you start typing for this particular item. Make it common so you use this item each time you are billing your customer for this service or part. This is for your information.

Description

Description is an area to type what you want to show up on the invoice as description of service or product. Yes, I know it depends, but the common information typed here saves times as it will not need to be typed again, and can always be changed if needed.

Rate

The Rate will be different. However, even if you charge $10.00 – 50% of the time, you will not have to enter it on 50% of your invoices, it will be there automatically.
Account

Account is how you tell QuickBooks where to record the transaction. Since you can only attach the item to one account unless it’s inventory, you will need one item for each sales account on your chart of accounts.

One common mistake is using the same non-inventory part item for customers and vendors alike. Because the item can only be linked to one account, either sales or expenses, you need to setup two items if you wish to use on both invoices and purchase orders.  For example, “Shipping” – one item can be called shipping sales and the other can be called shipping expenses.

Inventory

For Inventory Items, you need to setup both the expense and the sale side.  When you purchase the item it should be placed into your inventory account.  When you sell the item two things happen: 1) The sale goes into your income account and 2) the item comes out of inventory and goes into your expense account.

Inventory in QuickBooks should be carefully monitored. It is necessary to watch the cost of items, because QuickBooks treats inventory on a weighted average dollar value.  As long as the item cost doesn’t increase significantly, the value going into cost is fine, but as always you should do a year-end inventory count on any of your major cost items as well as a spot check on the lower cost items.  Another problem with inventory is using different item names when purchasing and selling. Be careful when naming your items when it is received and when it is sold so you are using the same item, otherwise your inventory will get messy.

If you have questions regarding QuickBooks list categories, contact me at (715) 379-0116 or email me at carlilesos@yahoo.com. You can also connect with me on Facebook or LinkedIn.