How do you create a Product/Service item and map it to an income account, and what is the difference between Service and Inventory items?

• A. Create a New Item of type Service and assign an Income account; Inventory items do not track quantity on hand.
• B. Create a New Item, select type Non-inventory, and assign an Income account; Service items track inventory.
• C. Create a New Item of type Inventory and assign an Income account; Service items are not inventory tracked.
• D. Create a New Item, select type (Service/Inventory/Non-inventory), assign Income account; Service items are not inventory tracked, while Inventory items track quantity on hand.

Answer: (D)

In QuickBooks, creating a Product/Service item starts with choosing its type and mapping it to a revenue (income) account. The type determines how QuickBooks handles inventory and quantities. You create a new item and pick the type from Service, Inventory, or Non-inventory, then assign an income account for the sales revenue. If you choose a Service item, QuickBooks does not track any quantity on hand. If you choose an Inventory item, QuickBooks tracks quantity on hand and uses both an inventory asset account and a cost of goods sold account in addition to the income account. Non-inventory items exist for goods you sell that aren’t tracked as inventory and they still map to an income account but don’t track quantity. The option that covers all three types and notes that Service items aren’t inventory tracked while Inventory items do track quantity on hand is the most complete.