I’ve been discussing those misunderstood “Items”. In my first blog on Items, I said that Items were usually products, services and other charges and mentioned that a typical mistake was to use the wrong “type” of Item. My next article dealt with properly setting up an Item so it could track both expense & income if need be. Today I’d like to discuss another common mistake – coding an Item to the wrong account.
This frequently happens if the wrong type was used (e.g. the item might be coded to inventory asset when it’s actually a shop expense, such as nails). This also happens when the item was set up as a single sided item (i.e. you pick only one account and most often it’s an income account), but you use this particular item for expenses, but don’t select the expense account you want it to hit. The result is either a negative number in an income account or a net amount (there were both income & expenses in this account). To correct this, click on Item, Edit item, and select the correct account. If you have multiple years of history on this particular Item and have filed taxes, then check with your accountant before making changes. It may be best to change only future transactions so past numbers that were used for tax returns aren’t changed.
A quick way to see if you need to make changes to where an Item posts is to look at your Items List. 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. When reviewing where an Item will post, I recommend showing the COGS Account and 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.
So, this week, review your list to see if your Items are posting where you want on your Chart of Accounts. Let me know if you have problems or questions.