QBO Inventory and Products Management 1 — Questions and Answers
Question 1: Which inventory costing method does QuickBooks Online use exclusively?
- FIFO (First In, First Out) (Correct answer)
- LIFO (Last In, First Out)
- Weighted Average Cost
- Specific Identification
Correct answer: FIFO (First In, First Out)
QBO uses only the FIFO (First In, First Out) method for inventory costing.
Question 2: Where do you manage products and services in QuickBooks Online?
- Expenses menu
- Sales menu (Correct answer)
- Reports menu
- Accounting menu
Correct answer: Sales menu
Products and services are set up and managed under the Sales menu in QBO.
Question 3: Which product type should you select in QBO for a physical item you buy, track in stock, and sell?
- Service
- Non-inventory
- Inventory (Correct answer)
- Bundle
Correct answer: Inventory
The Inventory product type is used for physical goods where QBO tracks quantity on hand.
Question 4: What account does QBO automatically debit when you purchase inventory items?
- Cost of Goods Sold
- Inventory Asset (Correct answer)
- Accounts Payable
- Purchases Expense
Correct answer: Inventory Asset
Purchasing inventory debits the Inventory Asset account, where it stays until the items are sold.
Question 5: Which QBO report shows the current quantity on hand and total value of all inventory items?
- Profit and Loss
- Inventory Valuation Summary (Correct answer)
- Balance Sheet
- Sales by Product/Service Summary
Correct answer: Inventory Valuation Summary
The Inventory Valuation Summary displays quantity on hand and asset value for every inventory item.
Question 6: What happens to the Inventory Asset account in QBO when you sell an inventory item?
- It increases
- It decreases (Correct answer)
- It remains unchanged
- It transfers to Retained Earnings
Correct answer: It decreases
Selling an inventory item reduces Inventory Asset and moves the cost into Cost of Goods Sold.
QBO Inventory and Products Management 1
Which inventory costing method does QuickBooks Online use exclusively?