Tracking Landed Cost for Inventory Parts in QuickBooks Enterprise

Introduction

This tutorial will guide you through tracking landed costs for inventory parts using QuickBooks Enterprise. This feature, available in the 2020 edition and newer, allows you to allocate additional costs such as freight, insurance, and duties to your inventory items, enhancing your accounting accuracy and inventory management.

Step 1: Enable Landed Cost Feature

1. Open QuickBooks Enterprise in single-user mode.
2. Navigate to the menu bar and select Edit.
3. Click on Preferences.
4. Select Items and Inventory from the left sidebar.
5. Go to Advanced Inventory Settings.
6. Click on the Landed Cost tab.
7. Set up your landed cost account:
   • Create a new account called Landed Cost Clearing (or a name of your choice).
   • Choose whether it will appear on the balance sheet (as a current asset) or on the profit and loss report (as cost of goods sold).
   • Click Save and Continue.
8. Acknowledge that there are no current items mapped and click OK.

Step 2: Set Up Landed Cost Items

1. Go to the Item List.
2. Click on New to create landed cost items.
3. Set up each item as an Other Charge:
   • For inbound freight costs, name it Inbound Freight Costs and link it to the Landed Cost Clearing account.
   • Create another item named Duties and Taxes, also pointing to the Landed Cost Clearing account.
4. Create your inventory items:
   • For demonstration, create Landed Cost A and Landed Cost B with zero on-hand and zero average cost.

Step 3: Record Inventory Receipt

1. Create a new Inventory Receipt:
   • For Landed Cost A, enter 10 items at $50 each.
   • For Landed Cost B, enter 10 items at $150 each.
   • Leave the "Update the item write record" option as No.
2. Click Save.

Step 4: Enter Bills for Landed Costs

1. Record bills that will be allocated to inventory costs:
   • For instance, add a bill for FedEx for $600 under the Inbound Freight Costs item.
   • Create another bill for $1,500 for duties and taxes using the Duties and Taxes item.
2. Save these bills.

Step 5: Calculate and Allocate Landed Costs

1. Return to the bill that includes the inventory.
2. Click on the Calculate Landed Cost button.
3. In the lower portion, you will see your inventory items.
4. Click Add Bills to include the previously recorded bills.
5. Choose your allocation method:
   • By Quantity: Allocates costs based on the number of items.
   • By Percentage: Allows you to specify the percentage of costs to allocate.
   • Manual Allocation: Override the calculated figures if necessary.
6. Once satisfied with the allocations, you can update the selling prices if needed, then click Post.

Step 6: Review Changes and Confirm

1. After posting, check the item details for Landed Cost A and Landed Cost B to see the updated costs.
2. Verify the Landed Cost Clearing account to ensure it has balanced out as intended.
3. Ensure all bills are reflected correctly in your accounts payable.

Conclusion

By following these steps, you can effectively track and allocate landed costs in QuickBooks Enterprise. This process enhances your inventory management and financial reporting. Remember to be cautious about month-end cutoffs to avoid any discrepancies in your financial statements. For further assistance or to explore QuickBooks Enterprise, consider reaching out to a professional or visiting relevant resources.