Before in-app products can be created you will need to make sure there is a merchant account attached to your google developer account. If you don't have one created yet you will see the screen below.
Adding In-App Products
Once your application and merchant account is created click on the application you just created to open it's settings and go to the "In-app Products" section on the left hand menu. Click the Add new product button to start adding products
Managed products are non-consumable products. These products are allowed to be purchased only once. Google previously allowed unmanaged and managed products but they are now considered the same thing. The difference between the two are managed internally by the plugin itself.
Enter the Product ID Title, Description, pricing and language information for your product. Then choose Save, and change the status to Active by choosing the 'Activate' option. Repeat the process for each product you'd like to sell.
Adding Test Users
Unfortunately,Google does not let you 'buy things from yourself'. In other words, if the primary Gmail account is the same as the one you used to sign up for Google Play Developer, you'll need to change the primary account on the device to something else.
Although many Android devices will let you remove and add accounts, this isn't good enough for Google Play testing. You will have to factory reset the device if you did not create a google developer account with a separate email address than the primary account on your phone. See the documentation for your device's make and model if you need to factory reset the phone.
To add testing email address go to the Settings tab on the far left of the developer console and click on the Account details section. You should see a "Gmail accounts with testing access" section for you to enter google email addresses for testing.
**Note: these accounts could take up to 24 hours before they are allowed to test on your device.