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We currently use quick books online and im looking at switching my payroll to a cost of good from a fixed operating expense. Can anyone point me in a direction of how to do this or a company that can help me fix this? Thank you!!!

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I don't use the online version, and I know it's considerably different than the stand alone version, so your mileage may vary. I also use a payroll service that generates my GL entry for me and we simply import it, so again, what I tell you may not apply to your situation.

I don't believe QB will allow you to simply change an expense account to a COGS account. You'll have to create a COGS account for technician labor (not all payroll goes into COGS, only technicians), then pick a date for how far you want to go backward, like the first of the year or first of the month. Now simply open each payroll entry and change the account for your technician pay to the new Tech Pay COGS account. If you don't have your tech pay separated already in your payroll GL entry, you'll have to calculate tech pay for each period and make a new entry in the payroll transaction for tech pay, and reduce the expensed payroll by that same amount.

Of course, anything you do will screw up your bank account reconciliation, so you'll have to undo and redo those. It should be really fast because you're not changing any amounts coming or going from your checking account. You're only changing where that amount shows up on your P&L.

Hope this helps, or at least gets you started.

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  • 3 weeks later...

My background is accounting, I used to work for CPA's, and did also did the accounting for a motocross company in CA. My husband and I now own and operate a mobile auto repair shop. I still do all the accounting, plus service writing, etc. He does the repairs.

It is not hard to change the account type from an expense to COGS, however, it should be something you discuss with your CPA. Usually most payroll expenses are included as expenses - wages to technicians can be COGS, the rest would be expenses (but that makes it difficult when looking at a P&L to determine total payroll expenses very quickly).

If there are prior year entries in your Payroll expense account, and you want to change it from this year forward, the best way to do it would be create a new account in COGS for your payroll, then create a Journal Entry for this year's payroll to reclass from expense to COGS, then use the new account going forward. If you just change the account from expense to COGS, it can mess with the numbers your CPA used for your tax return for prior years.

If there are no prior year entries for payroll, the account type should be able to be changed pretty easily, as explained here. https://community.intuit.com/articles/1145400-account-detail-types

Again, check with your CPA to determine what would be best for you.

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