Entries for Graphic Artist Business
(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.
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.
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