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Monday, January 18, 2010

I bought inventory at "buy one get one free". How do I enter this in Quickbooks?

Sometimes a down economy can create unique opportunities.  One of my clients received a great offer from their supplier recently.  Basically, if they placed an order from the supplier for items they had never ordered before they would receive double the quantity at no additional charge.  If was a great opportunity they couldn't refuse.  However, considering all the mistakes that had been made with inventory entries in Quickbooks, they wanted to know exactly how to record the entry so the quantities and cost would be recorded correctly.

Since Quickbooks uses the "average" method to calculate the cost of your inventory, the entry can be completed as it truly is.  In other words, record 500 items received at the actual cost and record 500 items received at zero cost.

Let's assume that you order from your supplier using a Quickbooks purchase order.  You would create a PO for 500 pieces and send this off to your vendor.

Your generous vendor would then send you 1000 pieces.  When you have received the inventory and the bill in house you can use the Receive Items and Enter Bill in the Vendor Center to fill the Purchase Order as well as record the additional "free" inventory received at zero cost.  Simply add an additional line onto the existing PO reflecting the added pieces.

Quickbooks will average the cost of these 1000 pieces.  In the sample screen below you can see that even though your PO said the price of the doorknobs was $15.00 each, Quickbooks has averaged the cost out over various purchases at $9.64.  In addition, note that the available quantity reflects the full 1000 pieces received.

This method will insure that both your physical quantity and your actual cost are recorded correctly.

This material is for informational purposes only and not intended and financial, legal or tax advice. Please consult your finance, legal or tax professional to confirm the accuracy of all information. Quickbooks is a registered product of Intuit.

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