> For the complete documentation index, see [llms.txt](https://now-8.gitbook.io/now.-features/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://now-8.gitbook.io/now.-features/sales/inventory-and-cost-of-goods-sold.md). # Inventory & Cost of Goods Sold If you sell physical products, now. can track how many units you have on hand and automatically post **Cost of Goods Sold** when you invoice them. This page explains how it works. #### Quick Definitions * **Quantity on Hand (QOH)** — How many units of a product you currently have available to sell. * **Inventory Asset** — The total cost of all your unsold units. Shows up on your Balance Sheet. * **Cost of Goods Sold (COGS)** — What it cost you to acquire the products you've sold this period. Shows up on your Profit & Loss between Income and Expenses. * **Weighted-Average Cost** — When you buy more units at different prices, now. blends them into a single average cost per unit. That blended cost is what gets expensed when you sell a unit. #### Inventory Tracking Is Opt-In Inventory tracking is a per-product setting. Services and products that don't track inventory work the same as before: invoicing records income, billing records an expense, and that's it. To enable tracking on a product: 1. Open **Products/Services**. 2. Tap **+ → Product**. 3. Toggle **Track Inventory** on. 4. Choose the **Inventory Asset Account** (default: Inventory Asset 1300) and the **COGS Account** (default: Cost of Goods Sold 5005). 5. Enter your **Opening Quantity** and **Opening Unit Cost**. These choices are locked once the product is created. To change them, archive and recreate. #### How Costs Enter Inventory When you create a **bill** with an **Item line** for an inventory-tracked product: * The cost (quantity × rate) is added to your **Inventory Asset** account. * The quantity on hand goes up by the number of units you bought. * The weighted-average cost per unit updates: total inventory dollars divided by total units on hand. **Example.** You start with 10 widgets at $5 each (inventory value $50). You buy 10 more at $7 each. Inventory value becomes $50 + $70 = $120, and you now have 20 units. Your new weighted-average cost is $120 ÷ 20 = $6 per unit. If a bill includes sales tax (purchase tax), that tax goes to **Sales Tax Paid (5099)** as an expense — it does not get rolled into inventory cost. #### How Costs Leave Inventory (Selling) When you create an **invoice** that includes an inventory-tracked product, two things happen: 1. **Revenue posts.** Just like any invoice — Accounts Receivable is debited and your income account is credited. 2. **COGS posts automatically.** A separate journal entry debits **Cost of Goods Sold** and credits **Inventory Asset** for *quantity sold × current weighted-average cost*. Your quantity on hand drops by the units sold. This happens behind the scenes — you don't need to do anything extra. **Example.** Selling 5 of those $6-average widgets posts $30 to COGS and reduces inventory by $30 and 5 units. #### Quantity Cannot Go Below Zero now. blocks an invoice that would push quantity on hand below zero. If you try to invoice 8 widgets when you only have 5, you'll see an error. Receive more inventory (via a bill) or adjust your count first. #### Manual Quantity Adjustments For damage, theft, gifting, or recounts that don't go through a bill or invoice, use **Adjust Quantity** from the product detail. **Decreases** When you decrease quantity on hand: * **Debit** an offset account (an expense or COGS account) * **Credit** Inventory Asset The default offset is **Inventory Shrinkage (5025)**, a Cost of Goods Sold account already seeded in your Chart of Accounts. You can pick any expense or COGS account — but Opening Balance Equity is never selectable here. The dollar value of the adjustment is calculated automatically from your current weighted-average cost per unit. You enter the unit count; now. computes the dollars so your inventory pool and your General Ledger never drift apart. **Increases** When you increase quantity on hand (a found-stock recount, for example): * **Debit** Inventory Asset * **Credit** an offset account (an income or COGS account) The default offset is **Cost of Goods Sold** (a "negative COGS" / recovery). **Inventory Shrinkage** is intentionally not selectable on increases — booking negative shrinkage would be misleading on your income statement. #### Deleting a Bill That Brought Inventory In You can delete an unpaid bill that has inventory items, but only if the units it brought in are still on hand. If you've already sold any of those units (via an invoice on or after the bill date), now. blocks the delete and asks you to delete the dependent invoice first. This protects the integrity of the weighted-average cost pool — you can't remove cost basis that has already been expensed to COGS. If you delete a bill that has not had its units sold yet, now. removes the inventory it added and updates the pool. #### Deleting an Invoice That Sold Inventory When you delete an invoice that included inventory items, the COGS journal entry is reversed and the units return to your inventory pool at the same weighted-average cost they were sold at. Quantity on hand goes back up. #### What You'll See on Reports * **Balance Sheet:** Inventory Asset (1300) shows the total cost of unsold units across all tracked products. * **Profit & Loss:** Cost of Goods Sold (5005) shows what those units cost you when they were sold. Inventory Shrinkage (5025) shows losses from manual decreases. * **General Ledger:** Each inventory movement (bill, invoice, adjustment) appears as its own journal entry under the affected accounts. #### Inventory Disclaimer now. uses a **weighted-average** cost basis. It does not support FIFO, LIFO, specific-identification, or lot tracking. If your business or jurisdiction requires a different cost method, consult your accountant before relying on the inventory numbers in now. for tax filings. #### Related * Products and Services * Bills * Invoices * Chart of Accounts --- # Agent Instructions This documentation is published with GitBook. GitBook is the documentation platform designed so that both humans and AI agents can read, navigate, and reason over technical content effectively. Learn more at gitbook.com. ## Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. 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