I am entering non-inventory items. I see that the ones that were already entered were set up incorrectly. The expense account is COGS and the income account is Sales. Before I make changes I want to verify that the expense account should be an actual expense account not COGS and is it ok for the income account to stay as Sales?
Hello, Missy.
Let me clarify how the COGS account for the expense account works on non-inventory items in QuickBooks Desktop (QBDT).
The expense account is hit when you purchase the item (on a bill or expense), not when you sell it. So if you buy something and record it as an expense using a non-inventory item set to COGS, that cost goes to COGS immediately.
Many businesses reserve COGS for inventory items (which automatically calculate cost at the time of sale) and use regular expense accounts for non-inventory purchases. But if you're purchasing items specifically to resell and want them in COGS, it's also acceptable.
To answer your question, whether it is okay for the Income account to remain Sales? Yes, it's fine if that's how you categorize revenue from these items. You can use Sales or any other income account that fits your chart of accounts.
I also encourage you to consult with an accountant so they can guide you on the best way to track and classify these transactions for accurate reporting.
Let us know if you have further questions. We'll be right here to help you anytime.
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