# Accounting for Mistakes?



## ChameleonPrints (Apr 7, 2007)

How do you account for mistakes in Quickbooks. For example, I had a 100 shirt order and 2 of the shirts were lined up incorrectly, so I had to print 2 new shirts to complete the order. In Quickbooks I need to deduct 102 shirts from inventory. 100 for the order and 2 for the mistakes. What category should I use for those 2 mistakes? I know samples and such have a category that is considered "cost of goods sold", would this fall under a similar category?


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## CoopersDesignCo (Nov 14, 2007)

Hey Kris,
Maybe enter a credit memo and instead of using "Items", you could set up an "Other Charge" item in your item list - then point it to whatever account you prefer?
Give it a shot.


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## TeesForChange (Jan 17, 2007)

I think whatever is easiest for you and your accountant to understand... Maybe you can set up a category that is "DAMAGED" or something like that.


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## thutch15 (Sep 8, 2008)

Yeah you need to setup a new account that is for that kind of transaction...also you will have to pay use tax on those items if you did not pay sales tax on them to begin with. (If you state has use tax)


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## tfalk (Apr 3, 2008)

Create an expense account called damaged merchandise or something like that. Then do an inventory adjustment subtracting two from the inventory and use the damaged merchandise as the adjustment account. It will show up as an expense at the end of the year.


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## luischav3z (Mar 12, 2010)

Lost or damaged merchandise


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## brice (Mar 10, 2010)

This is the way the support at Quickbooks recommends it. 

Go to "Vendors' Drop down menu, choose "Inventory Activities" choose "Adjust Qty/value on hand" 
In this screen you can change the amount you have in inventory. 
You want to choose an account to write off the loss to, so you would use either your Cost of Goods Sold account, or if you want to keep track of the Loss due to Mfg process, you can make an account entitled as such. If you make the new account, make the type Cost of Goods Sold.


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## luischav3z (Mar 12, 2010)

Unless you are including those shirts in the sale it should not be in the cost of goods sold


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## chard (Oct 14, 2008)

what i do is i create a dummy customer named "misprints" and whenever i have misprints the invoice will go to that customer account but i will put the cost at 0.00..in that way you can still track how many misprints you have or which project you have the most or least number of misprints..


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## brice (Mar 10, 2010)

Actually Luis, it can be part of Cost of Goods sold. The cost of your goods sold include ALL of the materials you use to produce your end product including waste.


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## thutch15 (Sep 8, 2008)

brice said:


> Actually Luis, it can be part of Cost of Goods sold. The cost of your goods sold include ALL of the materials you use to produce your end product including waste.


No COGS is only things that leave with the product...for example heat transfer vinyl/ink should be COGS, because it leaves with the shirt...spray tack is used to produce the product, but does not leave with the item.


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## tfalk (Apr 3, 2008)

I disagree with including these in COGS. Since they are not in fact being sold, they should not be included in COGS. They are in fact a normal operating expense of the business and should be deducted as an operating expense just like maintenance, repairs, etc.

Of course, I'm not an accountant so the correct answer is to ask your accountant


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## thutch15 (Sep 8, 2008)

tfalk said:


> I disagree with including these in COGS. Since they are not in fact being sold, they should not be included in COGS. They are in fact a normal operating expense of the business and should be deducted as an operating expense just like maintenance, repairs, etc.
> 
> Of course, I'm not an accountant so the correct answer is to ask your accountant


I agree with you... and I am an accountant, haha. I am pretty sure direct labor can be counted as COGS, but the easiest way to think about it is anything thats leaves with the shirt is COGS.


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## luischav3z (Mar 12, 2010)

thutch15 said:


> I agree with you... and I am an accountant, haha. I am pretty sure direct labor can be counted as COGS, but the easiest way to think about it is anything thats leaves with the shirt is COGS.


But in fact COGS is actually merchandise sold and direct labor is a service not a good.


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## thutch15 (Sep 8, 2008)

luischav3z said:


> direct labor is a service not a good.


Agree, but I am still pretty sure it ties into COGS...Just like Freight. Freight is not a part, but it still is in COGS.


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## luischav3z (Mar 12, 2010)

thutch15 said:


> Agree, but I am still pretty sure it ties into COGS...Just like Freight. Freight is not a part, but it still is in COGS.


Yeah there is a lot of stuff lol.


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