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Calculating Inventory on Hand for Your Bookkeeper When Using External Inventory Tracking

Are you not using something ouside of QuickBooks Online to keep track of your inventory? If so, at the end of the year your bookkeeper will ask you for the cost of your “inventory on hand.” 
 
In this post, I’ll show you how to calculate that information.

Inventory On Hand

“Inventory on hand” refers to the inventory that you have in stock on a specific date. 

For tax purposes, you’ll need to know how much inventory you have on hand at the end of the year and the value of that inventory.

This is not how much that inventory is worth when you sell it, but how much it cost you when you purchased it.

Calculating the Value of Inventory On hand

To calculate the value of inventory on hand you’ll want to get a count of all your inventory. Get the purchase price of each item, multiply it by the quantity then add that all up.

Here’s a screenshot of a simple spreadsheet calculating the value of inventory on hand.

A simple spreadsheet calculating the value of inventory on hand

  • Description – Each “Thing” is a different inventory item
  • Quantity – how many are currently on hand
  • Purchase Price – how much the company paid for the item
  • Value = Quantity x Purchase Price
  • Total For Balance Sheet – Everything in the Value column is added together

When your bookkeeper asks for the value of inventory on hand, they’re asking for that total.

Unless your inventory is broken up into different categories on the balance sheet. For example, here is a QBO balance sheet with the inventory broken out into Floral Inventory and Retail Inventory:

Inventory on the balance sheet in QBO that's broken out in different categories.

If your inventory is broken out on the balance sheet like this then you will need to calculate the value for each category.

It’s that simple.

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Below is a video if you prefer to watch a walkthrough.

If you have questions about working with inventory in QuickBooks Online click the green button below to schedule a free consultation.

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This content is for information purposes only and should not be considered legal, accounting, or tax advice, or a substitute for obtaining such advice specific to your business. Additional information and exceptions may apply. Applicable laws may vary by state or locality. No assurance is given that the information is comprehensive in its coverage or that it is suitable in dealing with a customer’s particular situation. Gentle Frog, LLC does not have any responsibility for updating or revising any information presented herein. Accordingly, the information provided should not be relied upon as a substitute for independent research. Gentle Frog, LLC does not warrant that the material contained herein will continue to be accurate, nor that it is completely free of errors when published. Readers and viewers should verify statements before relying on them.

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