Dealing with Inventory - assigning to crops

[Lazy J]

We use QuickBooks Pro 2008 for our croping/custom farming operation. We also use it for our Feed Store in a separate company file.

This past spring we purchased Soybean and Alfalfa Seed. We entered all the purchase as Inventory. A portion of the seeds were Sold to our custom farming customers, sharecrop landlords, and as retail to neighbors. The remainder was used for crop production.

I read the description of the problems with inventory in QuickBooks on page 280 of the CookBook and understand the issue. However, is there a way I can get the current inventory out and assign it to the crop production? I though about modifying the Bills to place only the amount of seeds actually resold into inventory, then assigning the remainder to each class as a non inventory purchase of "Crop Seeds". This might be practical given that the inventory is less than 100 bags sold to ony 5 customers, but what about next year when we intend to work with many more clients?

Jim

[FlagshipTech]

We use QuickBooks Pro 2008 for our croping/custom farming operation. We also use it for our Feed Store in a separate company file.

This past spring we purchased Soybean and Alfalfa Seed. We entered all the purchase as Inventory. A portion of the seeds were Sold to our custom farming customers, sharecrop landlords, and as retail to neighbors. The remainder was used for crop production.

Jim

The solution that may work for you depends on a couple of things...

(I assume you mean the purchases were just in the custom farming books, not involving the feed store, as that would change my answer.)

One way to get the inventory out, to become an expense for the current year is just to "sell" the inventory to the farm business (use a Sales Receipt entry).


First thing: set up a dummy Bank-type account--call it Transfers, or whatever you want.
Now enter a Sales Receipt, selling the inventory Item in the appropriate quantity, with the farm business as the customer, and choosing to directly deposit the funds to your Transfer dummy bank account.
Write a check on the dummy Transfers account, for the same dollar amount, with Seeds and Plants Expense (whatever yours is named) as the offsetting account. And of course you can split this check up by using separate lines, as needed, for assigning expense to different Classes.

The result is that the remaining inventory quantity is cleared and the farm business is charged with an expense. Assuming your Seed Expense account has been assigned a Tax Line, then your Tax Report from QuickBooks should also be correct.

The only problems come in if you're concerned with generating an accurate P&L report directly out of QuickBooks. For that, the Cost of Goods Sold (COGS) needs to be correct.

If this is the first year you've recorded seed purchases into inventory in QuickBooks, then there's no problem: you'll be recording all inventory in and all inventory out in the same year, so the figure for COGS will be correct. But if you use the same QuickBooks Item(s) for recording seed purchases into inventory next year, then COGS will begin to be skewed due to QuickBooks' use of average costing inventory valuation. That's where a workaround is to set up a "new" inventory Item for seed purchases each year, to keep COGS more accurate. Of course that's messy, but there aren't a lot of alternatives.

However, many farmers can overlook QuickBooks' COGS problems in the P&L--if that describes you, then you can just use the same Items for recording seed purchases every year.

Mark Wilsdorf
Flagship Technologies, Inc.
QuickBooks™ Add-Ons and Solutions You Can Use
http://www.goflagship.com