our first purchase of inventory will be by check this means we are paying
immediately and receiving the merchandise at the moment that we pay what happens when you
pay immediately when buying inventory well as we said before the inventory asset will
increase because inventory asset holds the purchase cost of the inventory that
we currently have if we pay money to buy the merchandise at the moment we
receive it cash and bank will go down by the amount that we pay for the merchandise
inventory has a separate area of reports just attract the change in quantity the
best inventory report for you to look at is the inventory valuation detail let's open it
up before we record any transactions from the main menu click reports inventory and
then go to inventory valuation detail as a general policy in this course always change
the pulldown date to all all transactions regardless of date right now the report is
empty but every time you buy a particular item of inventory you will see that specific item
listed here with an increase in the quantity and every time you sell a particular item of
inventory you will see the item listed on another line with a minus to the quantity
our first purchase transaction will be May 18 we pay daddy's orchard by check which means we
paid immediately to buy 20 apples and we wrote a d check number 220 therefore we will have to
add a DS orchard to the vendor list at the moment we write the check we've done this
before let's take a look from the main menu click banking write a check now we put the date may 18
we put the vendor adding at the moment that we record the check at ease orchard and you
can fill in the details later click ok now do not I repeat do not put any money amount in
the money field instead click the items tab and choose the merchandise item you're buying apples
notice quickbooks remembers that Apple's has a purchase cost of ten dollars each we put in the
quantity it's actually telling us the quantity on hand by clicking this little box however we need
to enter the quantity as 20 and push tab after we push tab quick what QuickBooks will calculate the
amount of the check by multiplying the quantity x the purchase cost if the purchase course were
different we would change this number but we will leave it for now so we are buying more apples for
two hundred dollars and cash and bank is going down by two hundred dollars when we click Save
and close we can take a look at our inventory report inventory valuation detail shows just
only apples with a value of two hundred dollars the trial balance shows after our first inventory
purchase inventory asset shows up in the trial balance for the very first time as two hundred
dollars if you need an explanation of what that two hundred dollars is in inventory you can
always take a look at the inventory valuation detail and it will tell you each transaction
and the quantity and the item now let's see what the reports look like after our second
purchase imagine on May nineteenth we paid Sam's farm by check for 30 bananas that means we will
also have to add Sam's farm to the vendor list at the moment we write the check so here we are
back at the inventory valuation detail here is our trial balance banking write a check may 19th
Sam's farm we don't have them on the list so we click add new click ok and type in Sam's
farm and then click OK now Sam's farm is on the list do not put the money amount in the money
field if you are buying merchandise QuickBooks will calculate the money amount you do not use
the expense tab you use the items tab choose the bananas that we put in the in the items
list notice QuickBooks remembers that we have twenty dollars purchase cost per item we could
always check the current quantity by clicking the quantity box in this case there's nothing
because this is our first purchase next to the quantity box we type in the amount the
number of how many bananas we're buying after we push tab QuickBooks calculates the amount of the
check should be six hundred dollars because its twenty dollars a banana and we told QuickBooks
we're buying 30 bananas when we click Save and close we can see the inventory valuation detail
shows let's open it up a little let's see what it shows it shows that we have twenty apples
on hand we have 30 bananas on hand that means we have two hundred dollars worth of apples on hand
we have six hundred dollars worth of bananas on hand and that means the total inventory is
eight hundred dollars which should be equal to the inventory asset eight hundred dollars