{"id":11223,"date":"2022-01-24T14:38:03","date_gmt":"2022-01-24T19:38:03","guid":{"rendered":"https:\/\/certek.com\/kb4\/?p=11223"},"modified":"2026-02-06T17:16:04","modified_gmt":"2026-02-06T22:16:04","slug":"advanced-quickbooks-understanding-the-accounting-behind-selling-an-out-of-stock-item","status":"publish","type":"ht_kb","link":"https:\/\/certek.com\/kb4\/knowledge-base\/advanced-quickbooks-understanding-the-accounting-behind-selling-an-out-of-stock-item\/","title":{"rendered":"Advanced QuickBooks: Understanding the Accounting behind Selling an Out-of-Stock Item"},"content":{"rendered":"\n

Read this tutorial to see how Artisan and QuickBooks<\/a><\/strong> record what happens when you sell an item that you don’t have in stock.<\/p>\n

Intuit and QuickBooks are registered trademarks of Intuit Inc. Used with permission.<\/p>\n

There are a number of reasons why your inventory in Artisan may not properly reflect what you have in the real world: somebody could have miscounted, a customer moved things around, the wrong item was rung up, and so forth.\u00a0 Artisan tries really hard to keep up, but things happen and that’s okay. It is normal for most stores to have at least some inconsistencies.<\/strong><\/p>\n

The reasons why aren’t important in this article. We are exploring how to handle<\/em> those differences in QuickBooks and explain why some things are the way they are. We have given much thought to our QuickBooks interface, and have consulted many different CPAs, along with retail and QuickBooks professionals.<\/p>\n

Sometimes to make things clear, you need to complete the process to see the end result. We are going to explore a specific example and go step by step.<\/p>\n

BEFORE WE GO ON, however, it must first be understood that Artisan has multiple configuration options, and we have different uses operating very differently from each other. For example, Accounts Payable: Some prefer to do this all manually in QuickBooks themselves and others want the ease of entering Vendor Invoices and letting Artisan create those bills in QuickBooks.<\/p>\n

Additionally, and perhaps most importantly, Artisan lets you decide how to handle the case of Out-Of-Stock items or OOS when those items are sold.<\/strong> You can turn on a feature we call Pending Stock Corrections, which you can read about here<\/a><\/strong>. There are a number of settings in Artisan pertaining to QuickBooks that dramatically affect the behavior and your processes.<\/p>\n

The scenario we are about to describe does NOT use the Pending Stock Correction feature. If we had, it would be much easier and perhaps not even necessitate an article on the topic. We encourage the use of this feature as long as you understand what it is going on with it and that it requires regular routine maintenance<\/strong> to help you keep things more accurate than if you weren’t using the feature at all.<\/p>\n

Scenario 1:<\/strong><\/p>\n

A customer comes up to the sales counter with one of your products. As you ring the item up in Artisan, you notice that the quantity on hand on the Sales Screen says “zero.”<\/p>\n

\"\"<\/a><\/p>\n

However, the customer has the item in their hands, so, clearly, you have the item in-stock, so you’ll sell the item anyway.<\/p>\n

\"\"<\/a><\/p>\n

After they leave with the item, you realize this could have happened from one of the many reasons described above, but in our example, it was because someone hadn’t entered the receiving for this item, and just put the merchandise out on the sales floor.<\/p>\n

Artisan makes an Automatic Stock Correction to increase the number of QOH by the number of units being sold. The zero becomes 1 and then the sale is recorded and is now back to zero. The confusion occurs when this transaction needs to be recorded in QuickBooks. Here’s what this transaction looks like:<\/p>\n

Part 1<\/strong><\/h3>\n

Day End<\/strong><\/p>\n

\"\"<\/a>

<\/p>\n

Balance Sheet (QuickBooks Report)<\/strong><\/p>\n

\"\"<\/a><\/p>\n

Profit and Loss (QuickBooks Report)<\/strong><\/p>\n

At this point, we don’t really know where the inventory came from, it could even be free, but we have to account for it with this <\/span>Inventory adjustment<\/strong>.<\/span> If this inventory were free, a gift from our vendor, perhaps, then our income would indeed be 30.00 because it didn’t cost us anything.<\/em><\/p>\n

\"\"<\/a><\/p>\n

\n

\u00a0<\/p>\n

Part 2<\/strong><\/h3>\n

You realize that you need to receive the items. You received 5 in the real world a few days ago, so now let’s go ahead and record those items being received now, after the fact.<\/p>\n

Make a PO, Receive the items, and then enter a Vendor Invoice, as shown in the highlighted red box in the image.<\/em><\/span><\/p>\n

(The Gift Cards were also sold at the same time but are not related to our main focus).<\/span><\/p>\n

Day End<\/strong><\/p>\n

\"\"<\/a><\/p>\n

Balance Sheet (QuickBooks Report)<\/strong><\/p>\n

\"\"<\/a><\/p>\n

\u00a0<\/p>\n

After that, here’s what our inventory looks like: We received 5, sold one, and we have 4 left. But we now show that we have 5 units when in fact we just have the 4.\u00a0 NOW, WE MUST enter a correcting entry.\u00a0<\/p>\n

\n

Part 3<\/strong><\/h3>\n

After the correcting entry is made, we have our inventory correct and we can see that QuickBooks shows the correct numbers.<\/p>\n

Day End<\/strong><\/p>\n

\"\"<\/a><\/p>\n

Balance Sheet<\/strong><\/p>\n

\"\"<\/a><\/p>\n

Profit and Loss<\/strong><\/p>\n

\"\"<\/a><\/p>\n

This is the beauty behind the Pending Stock Corrections – it would have held off on making the OOS correction (that’s why we call it pending) and Artisan would post the receiving just prior to our sale. So, 5 minus 1 equals 4… without either of the correcting entries. Yay!<\/p>\n

Scenario 2<\/strong><\/h3>\n

Let’s say this time, though, we had simply miscounted our quantity on hand, or we forgot to count the free sample that the vendor gave us. Since we still have the inventory, it has to be accounted for in QuickBooks.<\/strong> We don’t have any receiving to offset the wrong count, so we make the correction.<\/p>\n

Think about how this would look in your books if a by-stander walks in and gives you one of your products to you for free.\u00a0 Maybe one of your customers dropped it out front by accident. If you just put it on your shelf, eventually it will come up as an OOS transaction. We can’t record the Cost of Goods Sold without balancing that entry with an adjustment. When you indicate to accept the correction in the Pending Stock Corrections<\/strong><\/a>, it will make this entry in QuickBooks<\/strong> as described above and will offset your Cost of Goods Sold expense because this item was actually free.<\/p>\n

Stock Corrections Settings for Out-of-Stock\u00a0Sales<\/h3>\n

To get to your Out-of-Stock settings, go to “Program Options<\/strong>.” Open “Inventory Handling Options<\/strong>,” then “Inventory Tracking Options<\/strong>.”<\/p>\n

\"\"<\/a><\/p>\n

In the “Out of Stock (OOS Handling)<\/strong>” section, look at the “Type of Correction to Apply to OOS Sales<\/strong>.”<\/p>\n","protected":false},"excerpt":{"rendered":"

Read this tutorial to see how Artisan and QuickBooks record what happens when you sell an item that you don’t have in stock. Intuit and QuickBooks are registered trademarks of Intuit Inc. Used with permission. There are a number of reasons why your inventory in Artisan may not properly reflect…<\/p>\n","protected":false},"author":17,"comment_status":"closed","ping_status":"closed","template":"","format":"standard","meta":{"_eb_attr":"","_monsterinsights_skip_tracking":false,"footnotes":"","_members_access_role":[],"_members_access_error":""},"ht-kb-category":[410,317],"ht-kb-tag":[],"class_list":["post-11223","ht_kb","type-ht_kb","status-publish","format-standard","hentry","ht_kb_category-external-accounting","ht_kb_category-accounts-receivable-a-r"],"_links":{"self":[{"href":"https:\/\/certek.com\/kb4\/wp-json\/wp\/v2\/ht-kb\/11223","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/certek.com\/kb4\/wp-json\/wp\/v2\/ht-kb"}],"about":[{"href":"https:\/\/certek.com\/kb4\/wp-json\/wp\/v2\/types\/ht_kb"}],"author":[{"embeddable":true,"href":"https:\/\/certek.com\/kb4\/wp-json\/wp\/v2\/users\/17"}],"replies":[{"embeddable":true,"href":"https:\/\/certek.com\/kb4\/wp-json\/wp\/v2\/comments?post=11223"}],"version-history":[{"count":101,"href":"https:\/\/certek.com\/kb4\/wp-json\/wp\/v2\/ht-kb\/11223\/revisions"}],"predecessor-version":[{"id":23002,"href":"https:\/\/certek.com\/kb4\/wp-json\/wp\/v2\/ht-kb\/11223\/revisions\/23002"}],"wp:attachment":[{"href":"https:\/\/certek.com\/kb4\/wp-json\/wp\/v2\/media?parent=11223"}],"wp:term":[{"taxonomy":"ht_kb_category","embeddable":true,"href":"https:\/\/certek.com\/kb4\/wp-json\/wp\/v2\/ht-kb-category?post=11223"},{"taxonomy":"ht_kb_tag","embeddable":true,"href":"https:\/\/certek.com\/kb4\/wp-json\/wp\/v2\/ht-kb-tag?post=11223"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}