How to initially enter inventory?

by Sylvia
(Orlando, FL, USA)

Hi, Kathy. I just found your site and have already learned several things, thank you so much. I have just started my own small business after retiring from a 30 year career. I make beaded jewelry and have been passionate about my hobby for 20 years; which means I have a lot of beads! I have read a couple books about home craft businesses and now am attacking the accounting/bookkeeping books. I am a sole member of my LLC and am waiting for my city/county approval before proceeding. I have programmed for accounting software for 13 years, so I am familiar with a lot of the accounting concepts – but inventory and cost of goods sold are entirely new to me. I haven’t been able to find the answer to my inventory question, so I am hoping you can help me. (I haven’t installed QuickBooks Pro 2014 yet.) How do I enter all of my beads and findings into inventory? And how do I enter about 50 pieces of assembled jewelry into inventory? I enjoy detail – but I don’t want to make my system over complicated either. I am thinking of setting up the COGS lines in a few categories – beads, metal/wire, findings, and gemstones. (beads for glass or other material that is not precious metal or gemstones). I am also not clear on when COGS is hit – is it only when the piece is sold so all beads and assembled pieces remain in inventory until then? But mainly, I want to know if I have to count every bead – and do I have to enter the units into inventory or can it be bulk entry. And if I can do bulk, is it helpful at all to create several entries like “Beads/blue glass/$250” and “Beads/green/$125” rather than one entry for $375? I am estimating about $25,000 of inventory in materials that I need to enter. Also – does this initial inventory get entered into owner capital at all? And finally, does this process differ after the initial startup entries

are created?

Thank you so much!


Hi Sylvia!

Okay, I'm going to try and answer all your questions.

First of all, in QuickBooks you can enter inventory items, at cost, and then take them out of inventory when you invoice a sale.

And yes, you will enter your beginning inventory as equity - an owner contribution.

I want to encourage you to email me directly, via my 'contact me' page, with any questions after you read this.

I would enter your current stash in 'bundles'. So you would make an item for 'blue crystal bead, 5 mm' for instance. If you have 50 of them and you purchased them for $100 each, post an entry for 50 beads for $5000, the debit will be "Inventory" and the credit for that entry will be "Owners Equity".

And so on.

Now, with each invoiced sale, you can take say 20 beads out of that inventory and move them into COGS in QuickBooks on the actual invoice by listing each item used on the invoice...

Like 20 blue crystal beads, 5 findings, 12" of wire, etc.

QuickBooks automatically moves those items out of Inventory and into your COGS account.

If you have partially assembled jewelry, technically that's 'Work in Process Inventory". Technically, large corps have 3 Inventory accounts - Raw Materials, Work in Process, and Finished Goods. But most small businesses only use the one - plain old "Inventory".

You could break the piece back into pieces, and enter those with the other 'items', or you could value the jewelry as an item itself, like, 'Green 18" necklace', and give it a specific value. Then add more products to it to make a finished piece. When you invoice it, take that specific item out of your Inventory. As long as you don't have that many pieces in process, it shouldn't be too consuming. But if you have a lot, I'd break them down (on paper, not actually) into specific beads etc.

I'm not sure if I've covered it all, so don't hesitate to email me.


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Nov 12, 2014
You're welcome!
by: Kathy

I'm sorry I had to give you bad news - LOL.

The important thing is to have a dollar value for your inventory at year end. If you don't get them entered into QuickBooks until next year, it's ok. You can do a Balance Sheet and Income Statement by hand if you must. :)

If you need any other help, just give me a shout!

Have a great day!


Nov 11, 2014
Thank you
by: Sylvia

Thank you so much for your response! I was afraid you were going to say that LOL. I don't know if I will be able to get my humongous stash of beads entered in time to file a tax return :-)
I do not have any works in progress, and don't plan to. I have beads/findings and some finished pieces, so that should help somewhat. Thank you again.

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