QuickBooks Inventory Groups vs Assembly

 

This document was written with QuickBooks 2006 Premier and Enterprise Solutions Versions in mind but it applies to other versions of the software also.

 

Group versus Inventory Assembly

 

The primary difference between a Group and an Inventory Assembly is that one can not use a service item in an Inventory Assembly.  It appears that a service item can not be included in an Inventory Assembly item because the Service item is not restricted to a specific expense account ahead of time.  This is necessary because when you build an assembly, the system needs to know where the cost of each element of the assembly will be charged.  However, you can create a Service item and check the box preceding the statement “This service is used in assemblies or is performed by a subcontractor or partner” which will then allow you to include the service item in an Inventory Assembly.

 

Another difference is that one can not perform a build assembly function for a Group item.  However, one can include an Inventory Assembly item in a Group item.

 

In general, the functions perform as follows:

 

Inventory Assemblies:

1. An Inventory Assembly is created in the Item List.
2. An Inventory Assembly is composed of other items in your Item List.
3. Name the Inventory Assembly and then add to it the items from your Item List that will compose the Inventory Assembly.
4. Once the above is done, the Inventory Assembly item will be available for use but one must first create the Inventory Assembly item before it can be sold.  Before creating the Inventory Assembly item, be sure you have a sufficient quantity of the other items in your Item List that compose the Inventory Assembly item.  This will require that you keep an inventory of the items that compose the Inventory Assembly item.
5. If you have sufficient quantity of the individual items that compose the Inventory Assembly, you can now “Build Assemblies” of that item.  Do this by selecting Vendors, Inventory Activity, and then Build Assemblies.  The Build Assemblies window is simple because the work was performed before you got to this point.  The Build Assemblies dialog window tells you how many Inventory Assembly items you can build based on the inventory of items that compose the Inventory Assembly.  Type in the number of builds you want to assemble.  This will have the effect of decreasing the quantity and cost of the individual components that compose the Inventory Assembly item and creating the Inventory Assembly items.  This will change the inventory but will not change the overall value of the inventory unless you included a service item (as described in the first paragraph) in which case the expense accounts would decrease and the inventory cost accounts would increase by the amount of the service items included in the Inventory Assemblies built.
6. Now you are ready to sell your inventory.  This can be done by creating a sales order as you normally would do and simply selecting the Inventory Assembly item as the item sold.  This will have no effect at all in the inventory, the general ledger, or the financial statements.  Basically, this represents an unfulfilled sales prospect.
7. The next step would be to create an Invoice billing the customer.  This would have the effect of reducing the inventory.  The effect on the general ledger and financial statements would be to reduce the inventory and increase the cost of goods sold by the same amount.  The accounts receivable account and the sales revenue accounts would increase by the amount of the sale.  If you charged sales tax, that amount would also be increased.

The functions described above are the same whether you use an Inventory Assembly item or a Group item.  The primary difference would be in the initial set up and when you enter a sales order for a Group item, you have to enter the rate for the service items if they had not been previously specified.  If this is not done, the customer will not be billed for the service items.