Income and Expense Items in QuickBooks
Last time I wrote about Items, saying they were probably one of the most misunderstood features in QuickBooks® and discussed what an Item was. I then mentioned that a common mistake was to use the wrong Type of Item. Today I’d like to discuss another common Item mistake – leaving an Item as “single-sided” when it should be “double-sided.”
If there is both an income and expense associated with the Item, a double-sided item is the way to go. I admit, it seems like you have to read the fine print to turn this feature on. While this seems obvious for inventory and QuickBooks automatically turns on both sides, another area it’s frequently useful is in job/project costs. You purchase something for the job and mark it up on the invoice – could be subcontracted labor or plants (e.g. for a landscaper). I once had a client who used one Item for the purchase and a different one when they sold. They had a very difficult time trying to assess profitability of the project! The beauty is that when this is set up correctly, the job and Item profitability reports give you some very helpful information. The first key is to click on the box saying it is used in assemblies, performed by a subcontractor or purchased for a job (wording varies depending on whether it’s a service or non-inventory part) . Then you see two sides – an expense (or Cost of Goods) side on the left and an income side on the right.
A quick way to see if you need to change an Item from single-sided to double-sided is to look at your Items List. You can customize the columns that you see and the order in which you see them simply by right-clicking in the Items List and selecting Customize Columns. You can decide which columns you see and in what order. Since you will most likely need to fix the expense side, I recommend showing the COGS Account in addition to the Account (usually an Income account).
You can then quickly review all your Items rather than having to use the Edit mode to view each one. If any need to be changed, simply double-click to edit.