We appreciate you for joining in the thread, Alan Roden.
With regards to your question if an item has its income or expense account adjusted if it will be retroactive to previous transactions, then it depends if it is a service and non-inventory items or inventory items. If you are using QuickBooks Online (QBO), for service and non-inventory items, we have the option to select the Also update this account in the historical transactions checkbox after step. This updates all transactions that use the item. However, for inventory items, the checkbox doesn’t appear. This is because inventory items track quantities on hand using First In, First Out (FIFO). FIFO affects your assets and Cost of Sale (COS) differently from service and non-inventory items.
Just in case the past transactions aren't updating, change the income account then switch it back to the correct one. To learn more about changing the income account for any of your product or service items in QuickBooks Online, you can check out this article: Change the account for a product or service item in QuickBooks Online.
For the expense account, we can update the account to track how much you spend on a product or service. Here's how:
- Go to Get paid & pay or Sales, then select Products & services (Take me there).
- Find the product or service on the list and tap Edit in the Action column.
- Click I purchase this product/service from a vendor.
- Add a description. This shows on bills, purchase orders, and other forms you send to vendors.
- Add the Cost. If the price changes, don’t worry. You can still enter the updated price when it’s time to buy supplies.
- Choose the account you use to track the cost of things you sell from the Expense account ▼ dropdown.
- Select your preferred vendor.
- When you're done, press Save and close.
You can track them on your financial reports. I’m also adding an article that tackles recording an item to an incorrect account. Please know the steps are from the desktop version, but some of the solutions will apply to QBO: How to Fix Items Posted to The Wrong Account in QuickBooks.
Also, we can run the Profit & Loss report since it is fed by your business income and expense accounts, including the cost of goods sold accounts as well as other income accounts like interest earned or other expense accounts like depreciation expenses.
I want to make sure I've got you covered. You can click the Reply button below for follow-up questions and clarifications about mapping accounts with your products and service items. I'll be in touch.
