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Inventory Overview – QBO vs. QB Pro

Inventory tracking is very important for some companies. A business that buys and sells products needs to know a number of things.

  • How many of a certain product do I have on hand? Do I have enough to sell more?
  • Which products are best sellers?
  • Which items are most profitable?

We could come up with a few more, but for business owners, those are the questions asked most often.

We expect our accounting software to help answer these questions. That makes sense. The buying and selling of inventory is an accounting function. A few added features and, for the small business, we have inventory management as well as accounting.

Let’s look at inventory basics in QuickBooks Online (QBO). And how does that compare with the time-tested abilities of QuickBooks Pro (desktop).

Inventory tracking can be enabled in QBO Plus. This is accomplished in Company Settings (the gear icon), the Sales section, Products and services. Click the pencil icon to edit.


With the above settings in QBO, you are ready to track quantities on hand for the products you sell.

The next step then, is to create the products on the Products and services list that you want QBO to track. The setup for these types of items is different than for those products or services not tracked.

In the above screenshot, Craig’s Design and Landscaping Services, our sample company, is creating a new product they will track as inventory. The first step is to mark the item “Track Quantity on Hand.”

The setup window for products with tracking enabled is different from other items and services. These inventory items will have three accounts as opposed to one or two for other items.

The Inventory Asset account will track the value of inventory on hand. When you purchase inventory, QBO posts that transaction here. However much you pay for that inventory, that is the cost that will record to inventory asset.

QBO will post to the Income Account when any of these products are sold on an invoice or a sales receipt. The price for which the product is sold is the amount that QBO will record to the income account.

Another account is affected when a product is sold. Since QBO will have to reduce the inventory asset account value (we have less inventory since we are selling one or more), that amount will post as an expense. The Expense Account is normally a cost of goods sold type.

How does this compare to QuickBooks Pro?

There is not a lot of difference at this point. In QB Pro, inventory features are turned on under preferences.

The setup for products we want to track, inventory items in QuickBooks Pro, may look different, but has the same functions.

While the window looks different, the three accounts we needed in QBO, are present in QB Pro as well.

Next time, we’ll look at inventory transactions where some of the difference between the two software packages will become more apparent.

Hector Garcia, CPA
Certified Advanced QuickBooks ProAdvisor
12401 Orange Drive #136
Davie, FL 33330

Hector Garcia

Hector Garcia

Hector Garcia is a CPA and QuickBooks Consultant.

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