Cost of Goods Sold
In a Resale Printing Corporation

by Ana

How can I use this account in my business if I do resale of the printing jobs like ...

... business cards, flyers and more?

Is it right to use Cost of Goods Sold (COGS) when I pay my vendors?

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In a Resale Printing Corporation

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Feb 04, 2010
Two Methods of Inventory
by: Lake, Bookkeeping Essentials


It would be helpful if you provided a bit more detail.

Is your accounting system manual, a spreadsheet or a small business accounting program like QuickBooks?

How you record your inventory purchases (materials and/or products purchased for resale) depends on which method you are using ... the periodic method of inventory or the perpetual method of inventory.

Can you tell me which method you use?

Read about both methods of inventory here ... if you are not sure which one you are using ... then reply back using the link at the bottom of this page which says Click here to add your own comments.

As a general rule, if you are using the periodic method of inventory, you would setup the accounts payables to your vendors through your Purchases account NOT your Cost of Goods Sold (COGS) account. Your COGS account wouldn't come into play until inventory is adjusted at year-end after a physical inventory count.

If you are using a perpetual inventory system, your accounting system would offset the accounts payable to your vendor through your Inventory account NOT your COGS account. Your COGS account wouldn't come into play until you actually sell some inventory.

Feb 05, 2010
Inventory Purchase
by: Ana

Thanks for replying so soon.

Actually, I do not use any inventory account in my small business because I don't buy merchandise to sell.

I send orders to printing and pay my vendor immediately. They deliver the complete order to me. Then I deliver the order to my client. Basically we are brokers.

In this case, how can I use accounting accounts (setup in the chart of accounts) without making mistakes? I am not really an accountant so it is difficult for me?

I am currently using the QuickBooks program.

I was using Accounts Payable for my vendors, but I changed the account to Cost of Good Sold (COGS) because my Profit & Loss (P&L) report did not reflect what I paid to the vendors. These payments always stayed in Accounts Payable.

Thanks, Ana

QuickBooks® is a registered trademark of Intuit, Inc.

Feb 06, 2010
How To Record Accounts Payable in QuickBooks
by: Lake, Bookkeeping Essentials

Editor's Note Feb 7 -- This posting is not correct with regards buying product for a specific customer. See the next post. It is correct on how to enter accounts payable though. Sorry about that. I goofed! :0)


The COGS account should not be used for the type of entry you are booking.

Your expenses were not showing on your P&L report because you were not booking the entry properly in QuickBooks.

There are two steps to the transaction.
  1. Enter you vendor invoice in Enter Bills.
  2. Pay your vendor using Pay Bills not Write Cheques.

Here is how to book your vendor invoice using Enter Bills:

Under the Expense Tab, choose your expense account Supplies ... then fill in the rest of the data. Once you hit enter, QuickBooks will debit Supplies (on your P&L) and credit Accounts Payable (on your balance sheet).

Here is how to book payment of your vendor 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.

You may want to track your product types so you can be proactive in managing your business.

To do this, setup Non-inventory Parts in Items coding each item (like business cards, flyers, etc.) to the Supplies account. Then when you enter your accounts payable, choose the Items tab instead of the Expense tab.

If you don't understand what I'm trying to say, reply back and ask for clarification. I hope this helps you out. :0)

Feb 07, 2010
Non Inventory Part
by: Lake, Bookkeeping Essentials

Okay Ana, my apologies. My previous response was not correct. Sorry ... I haven't worked with inventory in awhile. :0(

In this instance, you would be correct to use a COGS account because you are purchasing materials for specific sale.

This is how it should be done.

Use the Non Inventory Part from the Item list to create items like flyers, business cards, etc. 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) and a sales account.

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 will allow you to calculate your gross margin on each product sold.

Now, you can follow the directions on how to enter and pay your vendor bills ... making sure you use the Items Tab NOT the Expense Tab.

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