The Motley Fool Discussion Boards
Financial Planning / Tax Strategies
|Subject: Re: COGS||Date: 9/18/2012 11:58 AM|
|Author: Wradical||Number: 116600 of 121219|
Correct me if I'm wrong, but I believe if a person has a small manufacturing business, but doesn't keep inventory - basically buys material, makes a product, sells it all pretty much at the same time for each order placed, they don't have to deal with Cost Of Goods Sold, do they? They can simply expense the materials they buy.
"But doesn't keep inventory?" - That means that on New Year's Eve, as the crystal ball is falling in Times Square, there is no raw material sitting in the shop, and there are no half-finished jobs in process. If that's true then you don't have to keep track of inventory. (And work-in-process includes labor, and an overhead component, too.)
And if you do just expense the materials you buy, that, and your labor and related costs, are still Cost of Goods Sold. You just aren't adjusting for inventory changes.
And if you're running a manufacturing business of any kind, you really should be working with an accountant, and talk to him/her about this.
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