sometimes service companies need to buy and sell non inventory parts a non inventory part
is something that we buy and sell that we do not need to track the quantity of usually it's
something like materials we charge the customer when we provide the customer or forests when we
provide a service for the customer examples of non inventory parts would be in the case of a
contractor bricks that a contractor will charge their customers for that they have to buy and
when they charge the customers they charge the customers for the service of putting up
the bricks as well as the bricks themselves in the case of Holden Holden might do a wedding video and
charge the bride and groom for DVDs that he burns them on in addition to the service of videotaping
the wedding in a case like that Holden does not need to track how many DVDs he physically has on
hand and he might still need to know the profit of buying and selling specifically the DVDs but
he does not need to know the quantity and the DVDs come with the service a decorating company
might charge their customers for the balloons that they buy from their vendor and when they
put up the balloons they charge for the service of putting up the balloons as well as marking
up the price from the from what they purchased from the vendor when they eventually put it on
an invoice or sale receipt and sell it to the customer we do not need to activate inventory
in order to use the non inventory parts what activating inventory means is that we would
create specific reports that would show the change in quantity but with non inventory parts we do not
have specific reports for those items because we don't have to track their quantity how do we
set up non inventory parts well first we have to make an expense account to accumulate the
purchase cost for all of the non inventory costs non inventory items that we buy we also have to
make an income account to accumulate all the money that the customers pay us for those specific non
inventory parts when we put them on the items list we put them as two-sided items a two-sided
item is an item that has two accounts connected it connected to it rather than one for example
the item of video weddings is already on our items list it has a specific price so when we
put it on a sales document like a sale receipt or an invoice the specific price that we put in
the items list will show up however DVDs is a non inventory part it's something that Holden
buys and sells so it will go on the items list as a non inventory part which means when we list the
DVD to put and put it on a sale receipt for a customer or put it on an invoice for a customer
it should already show up with the price that we put in the items list when we created this
item however because we also purchase this from a vendor that means that the DVD item will also
show up on checks and bills and other documents that we use to make a purchase the money amount
of the DVD should be different when we listed on the cheque or on the bill compared to the money
amount of the DVD when we list this same item on a sale receipt or an invoice that's why we call non
inventory parts two-sided items they need to have a money amount for the purchase cost and they need
to have a money amount for the sales price our first example of an inventory non inventory part
will be our DVDs let us imagine that we purchase the package of DVDs for five dollars each and that
we invoice the customer for giving them the deed at $20 each the expense account that accumulates
the money when we buy will be called quote cost of DVDs purchased the income account that we use
when we sell the DVDs will be quote income from DVD sales we already know how to put accounts in
the chart of accounts list chart of accounts account new the first one will be an expense
and we will name it with capital letters cost of DVDs purchased and we will click Save and new now
we will add another account an income account and we will call it income from DVD sales save
and close now we have the money the account that will hold the money or accumulate the money amount
just for the DVDs that we sell when we put it on the invoice or sales receipt and we also have an
expense to track the total money that we paid to buy all of our DVDs now let's put the DVDs on the
items list as a non inventory part list item list now we click item new and the choice we make here
is non inventory part now there is only one field for one account what we must do is check this box
this item is used in assemblies or is purchased for a specific customer or job when we click the
checkmark in this box we then have the ability to put both the purchase cost and the sales price
and we can put the expense account that we just made as well as the income account that we just
made the name will be DVDs ok the purchase cost from a moment ago was $5 the sales price that we
charged a customer for the same DVDs will be $20 the expense account that accumulates the money
when we buy is cost of DVDs purchased and the income account will accumulate the price of the
money that comes with us income from DVD sales when we click OK we now have the DVDs added to
the items list our first purchase of DVDs will happen on May 16th we purchased a hundred of
them from Staples with check 219 well let's take a look banking write a check now automatically
QuickBooks knows the next check on the list make sure you put the date as May what is it May 16th
ok now when we choose staples ok it's just gonna warn us that we have unpaid bills with staples
QuickBooks doesn't know that this check is not related to the other bills so we just
say continue writing a check now because we're buying a non inventory part we do not leave the
expense tab chosen instead we choose the items tab so that we can click the pull down menu for
the items list when we choose DVDs QuickBooks remembers that we had the purchase cost at $5
each when we set up the item we could always change this at the moment we buy if the vendor
jacks up the price the quantity I believe was a hundred so a hundred that means this check
219 is for 500 dollars and that means right now the total cost of all the DVDs we purchased is
$500 when we click Save and close we can look at the trial balance and you can see cost of
DVDs purchased shows up on the trial balance for the very first time as $500 on May 17th we did
11 hours on account 11 editing hours on account for Betty as part of the service she wanted the
result on two DVDs and we charged her for those DVDs on the invoice so customers create invoice
the date of that's collapsed the ribbon the date of the invoice was May 17th the customer
was Betty the quantity was well anyway the item was editing and the quantity was 11 however on
the next line we have the DVDs that were also selling to her and 2 of them so she is being
billed an additional $40 for the editing service because she wanted us to burn it on two separate
DVDs that increases the price of this invoice notice as soon as we chose DVDs QuickBooks did
not put $5 as the price QuickBooks put $20 because that's what we put as the sales price so $20 will
show up on the sales documents when we click Save and close and look at the trial balance
we now see income from DVD sales shows up for the very first time on the trial balance as $40