Last post we discussed how Enhanced Inventory receiving (EIR) works in QuickBooks Enterprise. Since once turned on, the feature cannot be disables, it’s an important decision for a QuickBooks user to make. This post – some of the cautions.
The balance sheet shown illustrates the entry made by an item receipt. Those entries affect the balances in the two highlighted accounts.
When the bill is created, the amount in Inventory Offset Account should be moved to Accounts Payable.
The problem occurs when the bill is created and additional amounts are added to it through the use of items. In the above example, an item is used to record the amount of freight on the bill. This line did not exist on the item receipt or purchase order.
QuickBooks reverses the amounts, posting to the Inventory Offset Account, even though that amount never posted into that account in the first place. We now have this odd balance that will not only stay indefinitely; it will most likely increase as additional transactions are processed in the same way.
There are two ways to deal with this issue and still use EIR. Neither are ideal, but they will work.
One solution is to add a line to each purchase order, which then carries to the item receipt, a freight charge item. Since no amount needs to be entered, this is a simple solution that could be implemented each time a purchase order is created.
The second solution would be to expense freight to an account on the Expenses tab of the bill form rather than using an item.
Either of these solutions should eliminate the mounting balance in the Inventory Offset Account.
Hector Garcia, CPA
Certified Advanced QuickBooks ProAdvisor