It is a common practice to use DEAR Inventory system integrated with accounting software. Below is explained how a chart of accounts works in integration with Xero, but the same principal applies to QuickBooks online.
- Make sure that the chart of accounts has the necessary accounts for tracking inventory: Inventory account and Cost of Goods Sold account. If there are no such accounts – we need to add them.
Other necessary accounts that are usually in the accounting system by default are:
-Accounts Receivable (A/R)
-Accounts Payable (A/P)
-Sales Tax , GST, VAT
3. Map accounts in DEAR (Settings -> Settings and Reference Books -> Financial -> Account Mapping). This allows DEAR creating transactions using correct accounts from the accounting system.
4. DEAR allows creating or updating product with relevant inventory control, revenue and COGS account to allow revenue analysis at product level.
After creating new products in DEAR we are now able to purchase them (Purchase -> New Purchase).
Please note, that despite the fact that we have a default account set at 140: Inventory – it will be overriden by newly assigned accounts 141: Inventory2
When selling the items (Sale -> New Sale) we will also get new Sales accounts for each product.
Basically, DEAR allows changing accounts from default for each transaction. That allows user to design effective chart of accounts needed for effective analysis and managerial decisions.