Entries for Graphic Artist Business

by Kyle
(St Catharines ON Can)

My partner is a graphic arist. He produces work (brochures, for example), and has them printed at a local printer company, then they invoice him and he pays the bill. Then he marks it up to include his time, artwork, design,etc, and invoices his client.

How should the "purchase" of the brochures from the printer be entered in the books? As a purchase (as in inventory), or as an expense (I've been using an account called "Projects Expense" for now)? Since it's really not a physical inventory that is kept for resale (as in a retail store), I'm not certain what the best way is to do this.

Also, by entering them as Purchases, he would be able to claim back the HST that he paid to the printer. Thanks so much in advance for your advice.


image of fancy scroll lines

Hi Kyle,

If you use QuickBooks, you would use the Cost of Goods Sold as purchases are being made for specific customers. Here's what you would do:

From the Item list, use the Non Inventory Part to create items like brochures, flyers, business cards ... whatever is purchased from the printer. Check the box that says "This item is used in assemblies or is purchased for a specific customer:job."

Clicking that box will allow you to set a purchase account (like Job Materials or Project Expense) AND a sales account (like Graphic Artist Revenue).

If you don't click on the box, the purchase and sale go to one account.

Unlike an Inventory Item, you can see that your purchases will be expensed immediately using this method so it should NOT be used to buy product and hold it ... which would then be inventory.

Using this method tracks your product types so you can be proactive in managing your business. It will allow you to calculate your gross margin on each product sold if you want.

Your next step would be to enter the printer's invoice. You can follow these directions on how to enter and pay your vendor bills ... just make sure you use the Items Tab NOT the Expense Tab when entering your bills.

When you receive your bill from the printer, here is how to book it into QuickBooks:

Using Enter Bills, under the Items tab (not Expense tab), choose one of your preset items such as brochures, flyers, business cards ... then fill in the rest of the data. Once you hit enter, QuickBooks will debit the account associated with the Item you selected (on your P&L) and credit Accounts Payable (on your balance sheet).

When the bill is due, here is how to book payment of the printer's invoice:

Using Pay Bills, select the bill to pay and complete the window. When you hit okay, QuickBooks will debit Accounts Payable and credit Cash in Bank. Both of these accounts are on your balance sheet.

P.S. I would like to remind you there is a difference between information and advice. The general information provided in this post or on my site should not be construed as advice. You should not act or rely on this information without engaging professional advice specific to your situation prior to using this site content for any reason whatsoever.

QuickBooks® is a registered trademark of Intuit, Inc.

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Feb 25, 2011
by: Kyle

So sorry, but I should have specified that I'm doing the books "manually" (using an accounting program but set up manually).

I have no knowledge of quickbooks, so your help so far is a bit fuzzy to me, because I'm not familiar with the Quickbook buttons, such as Item List, Non-Inventory Part, etc.

I'm doing everything using accounts and journal entries. Hope this doesn't use up too much of your time, but I really appreciate what you're doing, and your website!

image of fancy scroll lines

Kyle, I am a little confused. Why would you keep books "manually" in an accounting software program? You increase the likelihood for error and many reports that could be used to run the business may not be reporting correctly?

Generally, the only journal entries you should be making in QuickBooks are amortization, loan interest and tax provisions. Most other entries should be made using the proper QuickBooks form.

Feb 28, 2011
GnuCash Accounting Program
by: Kyle

Sorry again, I guess my terminology is outdated.

I am using an open-source accounting program called GnuCash, and haven't gotten around to mastering it yet, so for now, I am just doing "manual" entries, general journal style. That's why I just need to get the proper accounts I need to do the entries to.

I'm sure it will mostly be automatic, after I read the complete manual for the program, but right now, I have our two small home-based companies to do income tax for, so there's no time to read the massive guidelines that came with the accounting program.

Generally, I just need to know which accounts are affected for the type of transactions I am dealing with. Thanks again for all your help. Kyle.

Feb 28, 2011
Journal Entries
by: Lake

Hi Kyle,

If I've understood correctly, I think this is what you are looking for:

When you get the bill from the printer:

Dr Project Expenses
Cr Accounts Payable

When you pay the printer's bill:

Dr Accounts Payable
Cr Cash in Bank

When you invoice the customer:

Dr Accounts Receivable
Cr Sales
Cr GST/HST Collected

When the customer pays the invoice:

Dr Cash in Bank
Cr Accounts Receivable

You may be interested in my chat on how to track GST/HST manually.

Mar 01, 2011
by: Kyle

Hi Lake. That's exactly the info I needed. Thanks again for your patience and hard work.

When I completed my Business Administration degree (Accounting Major) back in the early 80's, there really wasn't any such thing as computer accounting programs, so I learned it all the "manual way", so never felt it necessary to learn an accounting package that "does it all for you". I guess that can be a good thing, right?

Thanks again. Kyle.

image of fancy scroll lines

Kyle, the thing about the accounting packages nowadays is they are user friendly if you have an understanding of basic bookkeeping. Their main strength in my mind is the information that can be mined from them to help you run your business.

If you don't have a lot of customers/vendors, you might want to take advantage QuickBooks free offer to see if the program could work for you.

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