Taking Inventory In QuickBooks POS 5

Inventory for most smaller retail stores should be taken at least every 6 months.  The easiest way to do this is to make sure you are using bar codes for tracking your inventory items.  This way you can use the

Inventory Management

following inventory scanner and spend much less time (you can rent or purchase these from QB Services).  For example, one store owner who had about 1000 items in her store finished the entire inventory in 3 hours!
However, if you want to do things the old fashioned way or simply use bar codes, then here is a step-by-step procedure for doing a manual inventory:

    1. In QuickBooks POS 2013, go to the inventory menu and click on, “Start Physical Inventory“.
    2. If you are only trying to take inventory for one vendor, department, combination of items, then select under the “View” drop-down, the create filter option and filter for those items you are wanting to count.  This is especially nice if you are a larger department store and are only wanting to perform inventory on one section of the store at a time.  Pay attention to the following CAUTIONS if you are only doing a partial inventory:
      1. Make sure that your count is complete!  Sometimes a product from one department, may be in a completely different part of the store and you forget/don’t include that in your inventory count.
      2. DO NOT SELECT THE “Set all items not counted to zero” CHECKBOX!  Otherwise, the rest of your store inventory will be wiped out!TIP:  Save the filter you create for your inventory count so that when you have completed taking the inventory, you can use that filter again for faster data entry.
    3. From the “Print” drop-down menu, select, “PI Worksheet for current View” and print it out for your count.  If it is too many pages, you may want to opt for the inventory scanner route.
    4. PI WorksheetClose the “Physical Inventory” form and go count your inventory.
    5. When you are done with your count for the day, go back to the inventory menu again and click on “Start Physical Inventory“.
    6. If you saved your filter, use the “View” drop-down and select that filter again for faster data entry.
    7. Enter the amount of each item from your count worksheet in the “Counted” column.Physical_Inventory_Form


  1. If you are counting all of inventory for your whole store and not just a single department, then after you are done entering the count for your items, if and only if this is your first count for the store, select the “Set all items not counted to zero” check box.  This way you will zero out all of the items that are not counted yet.  On the following count entries for the store, you will not want to check this box otherwise you will zero out the items you just entered!For example, say it’s Saturday and you wake up nice and early to go and count inventory (fun!).  At noon, you haven’t finished the count but because you put a red ribbon on all the counted shelves/racks or whatever, you decide you are done for the day and want to complete the inventory counts the next weekend.  Since this is your first count of the store for this inventory cycle, you will:
    1. Enter the items you counted
    2. Select the “Check all items not counted to zero” box so there is a check-mark in it.
    3. Click on, “Apply Changes to Inventory”.
      1. The reason for this is that when you do the QuickBooks POS Financial Exchange, QuickBooks POS will create a journal entry in your QuickBooks inventory asset account which will be reflecting the counted items and non-counted items.  So what happens during the rest of the week?  You will be selling items that were not counted and your inventory will go negative!  That is correct, however, when you complete the count on the next weekend, you will be correcting the count on the remainder of your uncounted inventory items and QuickBooks will make the appropriate adjustments.
      2. So if you have an item with cost of $10 and a count of -5, and you count 5 items left in your store, QuickBooks will apply a correcting Journal Entry of 10 X Cost/item (so in this case it would be $100.00).  In other words, you are not going to be off from a financial standpoint unless there were manual entries made directly to the QuickBooks inventory asset account being used.
      3. The reason for not simply using “Saving & Continue” is that your inventory count for that day is going to change with the sales and item receiving vouchers that are created during that week.  So when you do complete the inventory, it will be off again by the weeks sales.
      4. In this scenario, it is better to apply the inventory count on the same day that the items were counted and have the inventory go negative for uncounted items during the week.  Then, as you complete the rest of the inventory counts and apply them, you will be correcting all the uncounted inventory to the accurate counts. Note that during the time you are doing business, your balance sheet will be off until you complete your entire inventory count.
      5. Of course, the best option is to do a complete inventory and count all the items in your store when the store is not open.  But who want’s to destroy your whole Saturday?
  2. When you enter inventory counts for the remaining portions of the inventory, make sure you DO NOT SELECT THE “Set all items not counted to zero” CHECKBOX!  Otherwise you will negate the hard work you did on your first count.

NOTE:   If your QuickBooks inventory asset account does not match your QuickBooks POS inventory valuation, then when you are completely done with taking inventory, you should create a journal entry in QuickBooks to your inventory account for the difference.  Make sure to involve your CPA when doing this so they can make the necessary adjustments for your financial statements.

Please call QB Services if you have any questions!

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5 thoughts on “Taking Inventory In QuickBooks POS

    • Peter

      If you are using POS, there actually shouldn’t be any inventory items in QuickBooks… And I am unsure what you mean by update it?

  • mj

    just got done taking inventory, put my count in and selected add changes to inventory. Now I enter Purchase Orders and did a end of day procedure so it will go to QuickBooks then I go to item list and activate items I just received in so I can enter the bills an pay them. But inventory items will not come over to QuickBooks. Can you tell me where I need to check what went wrong?
    thank you

    • Jay Thompson
      Jay Thompson Post author

      Nothing went wrong. If you open up the item list in QuickBooks, click on the “Include inactive” checkbox on the bottom of the form. You will then see all your items. When inventory items come over to QuickBooks, they come over as “Non-inventory” items. The POS creates journal entries to enter the corresponding transactions (increase/decrease inventory assets, cost of goods sold, and income accounts) and also creates sales receipts for cash sales (including credit cards) in QuickBooks financial while it creates invoices for customer “on account” purchases.

      Since QuickBooks POS takes care of inventory, having another system also tracking inventory would be quite confusing. That is why the inventory items sold from the POS are pointing to non-inventory items in QuickBooks.

      One issue that I have recently seen is when someone changes a non-inventory item in QuickBooks Financial, which has already been linked to an item in QB POS, into an inventory item (because they don’t understand what was described above). This causes a doubling of the inventory asset and cost of goods sold values and can create…well, quite a mess.

      • PJ

        Thank you for your information Jay as I plan on doing physical inventory in my store in the next day and have not done this before. I have a question as I would like to perform inventory on just my wholesale items that are tracked with a cost in my store and that appear as a $ amount in my inventory assets under the Chart of Accounts in QB. I would like to do my consignment inventory items at a later date. Consigned inventory items are entered in our POS but with a zero cost and thus does not appear as an inventory asset in QB with a value in our chart of accounts. Does that make sense? Our consigned items are not assets we own so they have a zero cost and we use a third party software to record their COGS after we sell the item. If I just count the wholesale vendors items and skip the consigned items so I can check for shrinkage and make sure the inventory asset account following my wholesale items is accurate in QB…when I’m done would I hit “apply changes to inventory”…and if so, will this mess up anything with my not counting all the items in my store? Can you do a partial inventory or will it make a negative balance on selling those future consigned items that we didn’t count as your notes detail above? Thank you for your advice! I’m nervous doing this so any information is very appreciated.