I am currently setting up my business. When I purchase items, should I be putting them to Inventory on Hand (Asset) or Purchase Inventory Item (Expense). I am not sure how to purchase the item (Expense) and then have it show as Inventory on Hand.
When purchasing inventory items, use Inventory on hand account. You canât select purchases of inventory items account anyway.
Thank you, I customised the chart of accounts so I could select it, but before I get too carried away I will go back and change⌠Again, thank youâŚ
Question on inventory. As a company that rents items, the inventory is non-depleting. How is this set up in the inventory file and how does one bill this to the customer.
When an item is rented it is not available to others, but when it is âreturnedâ it now becomes available for others to rent. The item always remains as an asset or in inventory but not available when rented.
I donât think you should ever classify items held for rental as inventory. Standard accounting practice considers inventory to be goods or materials held for sale or production. Your rental items are fixed assets. They can be depreciated because they have a useful expected life.
The problem of knowing whether the asset is currently checked out is a different problem. One possible approach, if you arenât using the field for anything else, is to put a rental agreement or invoice number in the optional Code field when an item is out. Such an approach would involve selecting the Fixed Assets tab, clicking on Edit for the asset, and entering the code. Then youâd have to reverse the process upon check-in. Not very elegant, but it might work. The other option is maintaining some form of parallel record system (data base or spread sheet), which would probably be just as much trouble.
Iâm never one to encourage people to abandon Manager, but is there an application out there somewhere written specifically for your industry that would handle this? Possibly you could make a single entry per day to record receipts.
As @Tut said, donât use Inventory Items at all. Your rental items might be created under Fixed Assets tab. Manager doesnât have a module to track which fixed assets are available to rent and which are not.
Thank you all for your insightful replies. Regarding Tutâs response, there are, usually expensive, products written for the rental industry. Not cost effective for a small business that has a low volume and only a few items for rent. I was hopping for a better solution.
I can understand that the ârentalâ item is an asset and not a product.
I would like to be kept abreast it there are any changes in the future of tracking assets in Manager.
I do notice that Tracking Codes will allow you to track income and expenses by:
Job, Region. Division, Sales person and Rental property</strong text>.
Perhaps a bit more information on Tracking Codes might be helpful. Thanks
Purpose of tracking codes is to divide business into some units for reporting purposes. E.g. if you have rental properties, you can get separate P&L for each rental property you have. But itâs not a way to track rentals.
Since you have only a few items for rent, you can just track externally in spreadsheet which items are available for rent and which are not. Manager doesnât have these features because it is primarily an accounting program and rental schedule is not exactly an accounting matter.
Hi, I also run a rental service and I find tracking our rental items a serious hassle. But these insights are very helpful. Thanks.
Thanks for the insight. I manufacture and sell a product. I have multiple ingredients I purchase and then manufacture our final product which turns into inventory (so I have two inventories- ingredient supplies and finished product supplies. All are listed in âInventory Itemsâ.) We then sales order and invoice the final product.
How do I or the software account for an ingredient supply item purchased on the expense side when I select âInventory on hand?â Does selecting the inventory on hand affect the âNet Profitâ on the financials? I may be doing this wrong because by using âInventory on Handâ for my ingredient purchases, I cannot tell what I am spending my money on, on the expense side.
Many thanks for your help
Inventory items are not an expense. It is an asset. It becomes expense only after it is sold.
In your case, you are not selling ingredients so the value of ingredients is converted into your final product.
Only when final product is sold, the cost of ingredients which made up final product is moved from assets to expenses.
This is basically how inventory is meant to work so your profit is not depressed when you buy a lot of ingredients upfront. And your profit is not inflated when you are selling stock which has been purchased long time ago.
I see, and when you say âOnly when final product is sold, the cost of ingredients which made up final product is moved from assets to expenses.â I see this recorded on the âInventory-Costâ line, right?
Yes thatâs right
There has been new functionality added to Inventory items which you may find beneficial.
Use could create under Settings - Chart of Accounts - BS new Inventory Custom Control accounts to enable the separation and tracking of raw materials and finished goods. This way, when you do a Production Order, values would shift from Inventory Raw Materials to Inventory Finished Goods and when sold to Inventory - Cost.
COA creation of Control Account
Allocation of Inventory Items to Control Accounts
Appearance on Summary tab
In fact you could rename the existing Inventory on Hand account to Inventory Finished Goods and just create the Inventory Raw Materials account, then you only have to re-allocate those Inventory Items which are raw materials
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Thank you for the input and new feature update. How do I re-allocate inventory items to a newly created account and how would I get the Raw Materials to link to the Bill of Materials in the Production Order? I donât have the âControl Accountâ drop down option in âInventory Item.â
Also is the link automatic for the values shifting from Inventory Raw Materials to Inventory Finished Goods to Inventory-Cost? I believe this would take place in the production orderâs Finished Items against Bill of Materials- right.
- You will need to update your version of Manager by downloading the latest edition.
- Once you have updated, create the COA - Inventory Raw Materials account as shown above, then go to each of your raw materials Inventory Items and select that âControl Accountâ from the dropdown.
- When you create a production order, you would enter the quantities of the Finished Good and the Raw Materials involved.
Currently it is not possible to store a Bill of Materials for a particular finished good and then have an automatic calculation of the raw materials used based on a variable finished goods quantity, but it is proposed as a future improvement.
However, If you are producing the âidenticalâ finished goods quantity then you can use the Clone feature of a previous Production Order so the re-entry of raw materials is not required
Yes. When you create a production order this will shift the associated values from raw materials inventory to finished goods inventory and when you create a sales invoice this will shift the associates values from finished goods inventory to inventory - cost automatically.
I just updated to 16.8.43 and here is a screen shot of my inventory page for a raw material item.
I donât have the control account drop down option, only two check boxes for the custom income or expense accounts. The two accounts âInventory Raw Materials and Inventory Finished Goodsâ are in Assets. The check boxes only allow for income or expense.
When you created the Inventory Raw Materials Control Account under Settings - COA did you select the Control Account tick box and select Inventory items as shown above. Then the Control Accounts will become active under Inventory Items
Can you show a screenshot of your COA - Inventory Raw Materials account
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Also, if you create both Inventory Raw Materials and Inventory Finished Goods as new accounts then the default Inventory On Hand account will remain on the BS but empty unless you have other inventory uses for it.
If there is no other use, then you could re-name Inventory On Hand to Inventory Finished Goods then you will only need to re-allocate raw material Inventory Items to the separate control account as the finished Goods will continue to use the default inventory accounts.
So I had not checked the tick box and that did it. I have now allocated and separated the raw materials from the finished goods. Thanks!