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|Subject: Re: I am such a Wannabee!||Date: 2/26/2004 8:57 PM|
|Author: SeattlePioneer||Number: 2011 of 5048|
<<Sorry to join in late. I'm not sure for IRS regulations, but for her (zsimpsion) business records can use either GAAP or cash basis accounting. If she uses cash basis, the inventory is an expense when the business pays for it. I *think* she can also report her records this way for IRS purposes, which is how she would have expensed the inventory the period she bought it, then realized the revenue when she received cash from selling it. I imagine this is what her accountants were telling her. Many sole proprietorships use cash basis accounting.
that is exactly what we are doing, so I think you hit the nail on the head.
This spouting off is worth what you paid for it.
Actually, is is worth much more. Thanks!!
Part III of IRS Schedule C, use for reporting business income, requires you to report the cost of goods sold as follws:
35 Inventory at the beginning of the year ________
36 Purchases less cost of goods withdrawn for personal use _________
37 Cost of Labor ________________
38 Materials and Supplies ________________-
39 Other Costs _________________
40 Add Lines 35 through 39 __________________
41 Inventory at End of Year __________________
42 Cost of Goods sold Subtract line 41 from Line 40 and enter on Page 1 Line 4 _____________________
The cost of goods sold is an expense charged off against your business income for the year. Unsold inventory is not an expense you get to charge off.
I continue to suggest that those who claim that unsold inventory can be used as an expense are mistaken.
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