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QuickBooks inventory adjust question
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Posted 1/7/2019 09:19 (#7226527 - in reply to #7226448)
Subject: RE: QuickBooks inventory adjust question

The Inventory Part Item type is designed for a "buy wholesale, sell retail" situation, so it works perfectly for resale livestock. But Items for raised inventory vs. resale inventory have to be set up differently (they must point to different kinds of accounts).

The purchase cost of the resale livestock are stored as the inventory value of an Inventory Part Item. So when you sell, say, calves you bought last year for backgrounding, QuickBooks automatically takes the purchase cost of the number of calves you sold and posts it to an expense account (the account you selected in the COGS field when you set up the Item), which is the "Cost of items held for resale" line on the IRS Schedule F tax form. At year's end you will have a total for "Cost of items held for resale" without doing anything more than entering purchases and sales using the Items you have set up for your different batches of resale livestock.

The main point is that the purchase cost of a resale inventory is stored as the Item's value. That's why you should never change the value assigned to an resale inventory Item, except to correct an error. If you do, your "Cost of items held for resale" amount will be wrong at tax time.

Raised production, like grain in the bin or raised market livestock, are also best handled with Inventory Part Items, so you can (1) have automatically updated quantity information--like the number of bushels of corn you have remaining on hand, after entering sales in QuickBooks, and (2) so you can easily update the values of raised inventories for preparing a market value balance sheet, using QuickBooks' Inventory adjustment feature.

Because raised inventories are not purchased, they have $0 value assigned to the Inventory Part Items you set up for them. That's why you have to assign them a value to have it show up on balance sheets. Raised inventories are discussed in Vol. III of The QuickBooks Farm Accounting Cookbook.

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