How to Set Up Items in QuickBooks Desktop (2024 Guide)

To set up items in QuickBooks Desktop, go to Lists > Item List, click Item > New, choose the item type (Inventory Part, Non-Inventory Part, or Service), and link each item to the right income and expense/COGS accounts. Good item setup is what makes invoices, sales receipts, and inventory reports work correctly.

Here's a mistake that haunts QuickBooks files for years: someone sets up items in a hurry — wrong type, wrong accounts, names that made sense for exactly one afternoon — and the business spends the next three years working around the mess.

Items are the backbone of QuickBooks Desktop. Every invoice, sales receipt, bill, and purchase order pulls from your Item List. When items are set up right, your income lands in the right accounts, your inventory stays accurate, and your reports actually mean something. When they're not, you get mystery balances, wrong COGS, and inventory numbers nobody trusts.

So let's set them up properly the first time. It's maybe fifteen minutes of work that pays off every single day after.

Table of Contents

The three item types you’ll use most

QuickBooks Desktop offers a whole menu of item types, but 90% of businesses live on three:

Inventory Part: Physical goods you buy, stock, and sell. QuickBooks tracks quantity on hand and average cost for these. (Example: a plumbing supply store's pipe fittings.)
Non-inventory Part: Physical goods you sell but don't stock — you buy them specifically for a job or order. QuickBooks doesn't track quantity for these. (Example: a contractor ordering a specialty fixture for one project.)
Service: Anything you do rather than sell. Labor, consulting, installation, maintenance. No quantity tracking, just a rate. (Example: an HVAC company's diagnostic visit.)

There are others — Other Charge (shipping, restocking fees), Group (a bundle sold as one line), Discount, Subtotal, Payment, Sales Tax items — and you'll meet them eventually. But master the big three first; they're the foundation everything else sits on.

Before you start: get your accounts ready

Each item needs to point at accounts in your chart of accounts, so check these exist first:

An income account for what you sell (e.g., Sales Income, Service Income)
A COGS account for inventory parts (e.g., Cost of Goods Sold)
An expense account for non-inventory parts and services you purchase for resale

If you're not sure which accounts to use, ask your accountant before creating dozens of items — changing the account on fifty items later is nobody's idea of fun.

How to set up items, step by step

Step 1: Open the Item List

Go to Lists > Item List at the top menu.
Click the Item button at the bottom-left of the Item List window.
Select New (or press Ctrl + N).

Step 2: Choose the right item type

In the Type dropdown, select the item type.
Inventory Part if you stock it and want QuickBooks to track quantities and cost.
Non-inventory Part if you buy it as needed for specific jobs.
Service if it's labor or a service you perform.
Picking the wrong type here is the #1 item setup mistake. If you stock it, it's an Inventory Part. No exceptions, no "I'll track it in a spreadsheet instead."

Step 3: Name the item clearly

Give the item a name or number your team will actually recognize on invoices and purchase orders.
Be consistent: if you use manufacturer part numbers, use them for everything. If you use descriptive names, keep the format the same ("Widget, 2-inch, brass" not "brass 2in widget" on one item and something else on the next).
You can add a longer Description on Purchase Transactions and Description on Sales Transactions — these print on forms, so write them for the customer, not for yourself.

Step 4: Set the cost and price (inventory parts)

Enter the Cost — what you pay your vendor for one unit.
Enter the Sales Price — what you charge the customer.
Select the COGS Account, Income Account, and Asset Account (usually Inventory Asset).
Set the Reorder Point — the quantity at which QuickBooks warns you to reorder. Set it to something realistic, not zero.

Step 5: Set the rate (service and non-inventory items)

For a Service item: enter your hourly or flat Rate and pick the income account (or two accounts if you both sell and purchase the service — for example, subcontracted labor).
For a Non-inventory Part: enter the cost, the sales price, and link the expense account and income account.
Subitems are your friend here: create a parent item like "Labor" with subitems "Labor – Standard" and "Labor – Overtime" for cleaner reporting.

Step 6: Save and keep going

Click OK to save, or Next to immediately create another item.
Work through your list methodically. Boring? Yes. Worth it? Completely.

Setting up inventory parts: a quick example

Say you run an electrical supply shop and stock 12-gauge wire spools:

Type: Inventory Part
Item Name: WIRE-12G-500
Description: 12-gauge copper wire, 500 ft spool
Cost: $68.00, Sales Price: $119.99
COGS Account: Cost of Goods Sold, Income Account: Product Sales, Asset Account: Inventory Asset
Reorder Point: 10

Now every purchase of that wire updates your quantity and average cost, and every sale reduces quantity and records COGS automatically. That's the whole point — set it up once, and QuickBooks does the tracking forever.

Common mistakes to avoid

Using Service items for things you stock. Then QuickBooks never tracks quantity, your inventory asset account is wrong, and COGS is a guess. If it sits on a shelf, it's an Inventory Part.
Creating duplicate items. "Wire 12g", "WIRE-12G", "12 gauge wire" — three items for one product means three sets of numbers that never agree. Search the Item List before creating anything new.
Linking items to the wrong accounts. An inventory part pointing at an expense account instead of COGS silently misstates your financials. Double-check the account fields when creating each item.
Skipping the reorder point. Then nobody gets warned before you run out. Set it when you create the item, not "later."
Using vague item names. "Misc part" and "Service" tell you nothing six months from now. Name items like someone else has to understand them — because eventually, someone else will.

Conclusion!

That brings us to the end of this guide on setting up items in QuickBooks Desktop. We hope the steps explained above helped you create inventory, non-inventory, and service items with the right types and accounts from the start. If you run into any difficulty while following the steps, consider consulting a qualified and experienced QuickBooks professional for further assistance.

FAQs

What’s the difference between an Inventory Part and a Non-inventory Part?

An Inventory Part is stock you keep on hand — QuickBooks tracks its quantity and average cost. A Non-inventory Part is something you buy for a specific sale or job without stocking it, so no quantity is tracked. Choose based on whether the item lives on your shelf.

Can I change an item’s type after creating it?

No — QuickBooks doesn't let you change an item's type once it's created. You'd need to make the item inactive and create a new one with the correct type. That's why getting the type right the first time matters so much.

Do I need items for everything I sell?

Yes, if you want QuickBooks to work properly. Invoices, sales receipts, and purchase orders all require items. Every line on a sales form must reference an item from your Item List.

How many items can QuickBooks Desktop handle?

QuickBooks Desktop Pro and Premier support up to 14,500 items (including inactive ones); Enterprise supports up to 1 million. Most small businesses never come close to the limit — but if you do, that's a sign to move to Enterprise.

How to Set Up Items in QuickBooks Desktop (Inventory, Non-Inventory, Service)