Accounting Instruction, Help, & How To (Financial & Managerial)

In this blog post, we will explore the process of entering a normal sales cycle, including inventory management, into QuickBooks Online 2023. We will compare this process to an e-commerce scenario to demonstrate how QuickBooks can efficiently handle various business operations. By mastering the skills needed to utilize QuickBooks Online effectively, you can boost your bank books and streamline your financial management.

Step 1: Accessing QuickBooks Online and Setting Up the Environment

1. Open QuickBooks Online and navigate to the accountant view.
2. Toggle between the accountant view and the business view by clicking the cog icon at the top and switching the view below.
3. Duplicate necessary tabs to display reports side by side. Right-click on the tab and select “Duplicate” to create multiple copies.

Step 2: Generating Inventory Reports

1. Open the “Balance Sheet” report by clicking on the Reports menu and selecting “Balance Sheet.”
2. Duplicate the tab to keep it open for future reference.
3. Open the “Profit and Loss” report by typing “inventory” in the search bar of the reports section.
4. Select “Inventory Valuation Summary” to generate the report.
5. Go back to the “Balance Sheet” tab and set the desired date range for analysis.
6. Repeat the process for the “Profit and Loss” report, adjusting the date range accordingly.

Step 3: Understanding the Inventory Cycle in QuickBooks Online

1. In a traditional on-ground sales scenario, the inventory cycle involves purchasing inventory, recording it as an asset, and selling it while reducing inventory simultaneously.
2. QuickBooks Online facilitates the management of perpetual inventory systems, similar to an e-commerce situation where sales occur at a cash register.
3. The inventory is initially recorded on the balance sheet under the “Inventory” account and is also reflected in the inventory valuation summary report.

Step 4: Adding Inventory Items

1. Access the “Products and Services” section by going to Sales and then selecting “Products and Services.”
2. Add inventory items to populate bills, purchase orders, and payments.
3. Enter relevant information about each inventory item, such as description, cost, and sales price.

Step 5: Making a Sale with a Sales Receipt

1. Imagine a scenario where you are at a cash register in your store.
2. Create a sales receipt transaction in QuickBooks Online to record the sale.
3. Begin by selecting the customer for the transaction (generic customer number one for demonstration purposes).
4. Enter the date of the sale and specify the payment method.
5. Proceed to the items sold section and choose the inventory items sold, specifying quantities and prices.
6. Calculate the total amount and review the transaction details.

Step 6: Recording the Sales Receipt

1. Recording the sales receipt in QuickBooks Online is similar to scanning items and totaling the sale at a self-checkout in a physical store.
2. The transaction will increase the checking account or a designated clearing account like “Payments to Deposit.”
3. Save and close the sales receipt to finalize the transaction.

let’s open our QuickBooks Online test company file in the accountant view. You can toggle between the accountant and business views by accessing the cog icon at the top and switching the view below. To organize our reports, we’ll duplicate some tabs. Right-click on the tab at the top to duplicate it. Repeat this process to duplicate more tabs, including the inventory report.

Next, let’s open the balance sheet report. On the left-hand side, find the balance sheet report and click on it. Similarly, open the profit and loss (P&L) or income statement report. Type “inventory” in the search bar of the reports on the left, and select the “Inventory Valuation Summary” report. Now, return to the balance sheet tab and set the date range from 12/01/25 to 12/31/25. Run the report and repeat this process for the P&L tab, changing the date range to match the balance sheet report.

In a previous presentation, we discussed the flow of the inventory cycle in a traditional on-ground scenario, managing inventory using QuickBooks and a perpetual inventory system. Now, let’s compare this process to an e-commerce situation.

In a normal purchasing cycle, we buy inventory and record it as an asset in QuickBooks because we haven’t yet consumed it to generate revenue. When we sell inventory with a perpetual inventory system, we decrease the inventory simultaneously with recording the sales. In an on-ground scenario, this can happen at a cash register or through invoicing. For an e-commerce situation, let’s imagine a cash register-like process since it closely resembles the Shopify platform.

Now, let’s make a sale. In our store’s cash register analogy, we’ll use the Sales Receipt transaction type. Start by entering the customer’s details, keeping in mind that for an e-commerce store, less customer information might be necessary. Choose a generic customer, and enter the date as 12/15/25. Leave the payment method blank for now. Move to the items sold section and select the products, specifying the quantity and price for each item. For instance, let’s sell five units of Product A at $200 each, and seven units of Product B at $100 each, resulting in a total of $1,700.

Upon saving and closing the transaction, the impact is as follows: the sales receipt increases a cash-like account (Payments to Deposit), while the revenue account reflects the full amount of $1,700. Since we use a perpetual inventory system, the inventory decreases by the cost of the sold items, even though it’s not explicitly shown on the sales receipt. The related expense, Cost of Goods Sold (COGS), increases accordingly. The net effect on net income is the increase in revenue minus the COGS.

To review the impact on financial statements, run the balance sheet report and observe the amount in the Payments to Deposit account. The other side of the transaction is recorded in the revenue account. Additionally, the inventory account on the balance sheet shows a decrease. The inventory valuation summary report tracks the remaining units and their dollar value.

Comparing this process to an e-commerce platform like Shopify, the sale is facilitated through the online presence provided by the third-party platform. Instead of physical transactions, customers add items to their virtual shopping cart and check out electronically. Consequently, when inventory is sold on platforms like Shopify,

Managing inventory and sales in an e-commerce business can be complex, especially when integrating it with QuickBooks Online. In this blog post, we will explore the challenges and solutions when dealing with inventory, cost of goods sold (COGS), and sales tax in an e-commerce setting.

1. Inventory Management: In traditional scenarios, QuickBooks tracks inventory as it is bought and sold. However, in an e-commerce business, inventory is usually managed within the platform itself, like Shopify. This poses a challenge when syncing inventory data with QuickBooks. One approach is to manually enter each sale as a sales receipt in QuickBooks, mirroring the point of sale system. However, this can be time-consuming and redundant.
2. Periodic Inventory System: To address the challenge of syncing inventory data efficiently, a periodic inventory system is often recommended for e-commerce businesses. Unlike perpetual inventory, where inventory is tracked in real-time, a periodic system summarizes inventory information at specific intervals. This reduces the strain on QuickBooks, especially when dealing with a high volume of small sales.
3. Sales and Service Fees: In addition to the sale itself, e-commerce platforms like Shopify charge service fees and may handle aspects like refunds. These additional fees and charges need to be recorded separately in QuickBooks to provide an accurate financial picture. Integrating these fees with the sales information allows for a comprehensive view of the business’s revenue and expenses.
4. Sales Tax Considerations: Sales tax requirements can vary depending on the location and nature of the e-commerce business. Setting up sales tax in QuickBooks can help track and calculate the appropriate tax amounts for each sale. In some cases, automatic sales tax calculations based on your location can simplify the process. However, it’s essential to consult local regulations to ensure compliance with sales tax requirements.

Conclusion: Managing inventory and sales in an e-commerce business requires careful consideration when integrating with QuickBooks Online. By adopting a periodic inventory system, summarizing sales information, and accounting for additional fees and sales tax, businesses can streamline their financial management process. Remember to consult with professionals and stay updated on local regulations to ensure accurate and compliant financial reporting.

Sales tax and payment processing are crucial aspects of managing finances for e-commerce businesses. Integrating these components into QuickBooks Online can be complex, but understanding the proper handling of sales tax and payment processors is essential. In this blog post, we will discuss how to manage sales tax and payments in QuickBooks for e-commerce businesses.

1. Sales Tax Management: When it comes to sales tax, it’s important to note that the tax is typically imposed on the customer, not the business itself. Therefore, it should not be included as revenue on the income statement. Instead, sales tax should be treated as a liability on the balance sheet. This ensures that the business is recognized as a tax collector rather than generating revenue from the sales tax.
2. Sales Tax Payable: In QuickBooks, the sales tax payable account is used to track the sales tax liability. When you collect sales tax from customers, it increases the sales receipt’s total, but it doesn’t contribute to revenue. The difference between the sales receipt’s total and the revenue amount represents the sales tax payable. This amount is recorded as a liability on the balance sheet until it is paid.
3. Payment Processors and Deposits: For e-commerce businesses, payment processors like Shopify or Amazon handle the sales transactions and payment collection. In such cases, it may not be necessary to create individual sales receipts for every transaction in QuickBooks. Instead, the sales information can be summarized from the e-commerce platform and entered into QuickBooks in a simplified manner.
4. Streamlining Sales Tax Integration: While it may seem logical to use QuickBooks to calculate and manage sales tax, duplicating the process already handled by the e-commerce platform can be redundant and overwhelming. To streamline sales tax management, it’s recommended to rely on the capabilities of the e-commerce platform to calculate and collect sales tax. Then, summarize the sales tax information in a simplified format within QuickBooks, avoiding unnecessary duplication.
5. Payment Processor Deposits: When payments are received through payment processors, such as credit cards or other platforms, they are often deposited into a clearing or payments-to-deposit account within QuickBooks. These deposits represent the total amount collected, including sales tax. From there, the funds can be transferred to the appropriate bank account.

Conclusion: Managing sales tax and payment processing in QuickBooks for e-commerce businesses requires careful consideration. By treating sales tax as a liability, leveraging the capabilities of the e-commerce platform, and summarizing the sales tax information in QuickBooks, businesses can streamline their financial management process. Additionally, accurately handling payment processor deposits ensures the proper recording of sales revenue.

It’s important to note that sales tax regulations can vary by state and jurisdiction, and it’s crucial to stay informed and comply with the applicable tax laws. Consulting with an accountant or tax professional is recommended to ensure compliance and accuracy in managing sales tax and payment processing for your e-commerce business.

Managing sales and inventory for e-commerce businesses in QuickBooks Online requires some adjustments compared to traditional brick-and-mortar stores. In this blog post, we will explore how to simplify the process by breaking it down into manageable steps. We will discuss the importance of reconciling deposits, automating bank feeds, and summarizing information from e-commerce platforms like Shopify.

1. Reconciling Deposits: To streamline the reconciliation process, it’s beneficial to combine individual deposits into a single deposit in QuickBooks. This means grouping multiple deposits into one total amount that matches the bank statement. By doing this, you will have fewer entries to reconcile, reducing complexity and ensuring accuracy.
2. Bank Feeds and Automation: Automating bank feeds is a valuable feature in QuickBooks that simplifies the process of importing transactions. When integrating data from e-commerce platforms like Shopify, it’s essential to be aware of how the information will appear in the bank feeds. The bank feeds will show the total amount deposited into the bank account, including sales tax and other fees. Keeping this in mind will help you reconcile your bank statement more efficiently.
3. Managing Inventory in QuickBooks: QuickBooks’ perpetual inventory system is not designed to directly import inventory data from Shopify or similar platforms. To address this, it’s recommended to adopt a periodic inventory system within QuickBooks. Instead of importing every transaction, focus on summarizing the necessary information from your e-commerce platform. This approach avoids overwhelming your QuickBooks system and minimizes duplication of effort.
4. Breaking Down the Process: To simplify the integration of data from your e-commerce platform, follow these steps:

a. Determine the necessary information: Identify the data you need to import into QuickBooks, such as sales totals, fees, and relevant customer details.

b. Utilize import tools: Use QuickBooks’ import tools, such as bank feeds and integration apps, to bring in the required data. Be selective in what you import to avoid overwhelming your system.

c. Summarize information: Instead of creating individual sales receipts for each transaction, summarize the sales information into a single entry in QuickBooks. This summary should include the total sales, fees, and sales tax collected.

d. Reconcile with bank feeds: Match the summarized sales information in QuickBooks with the bank feeds to ensure accurate reconciliation. This step helps you verify that the total deposited amount matches what appears in your bank statement.

5. Simplifying the Process: By breaking down the process into manageable steps, you can simplify sales and inventory management in QuickBooks for your e-commerce business. This approach allows you to leverage the capabilities of e-commerce platforms while still maintaining accurate financial records in QuickBooks.

Conclusion: Managing sales and inventory for e-commerce businesses in QuickBooks Online requires careful consideration of the integration process. By reconciling deposits, automating bank feeds, and summarizing information from e-commerce platforms, you can simplify the process and streamline your financial management. Remember, it’s essential to select and import only the necessary data to avoid overwhelming your QuickBooks system. Stay informed about sales tax regulations, consult with professionals when needed, and adapt your processes as your business grows.