Message Font: Serif | Sans-Serif
 
UnThreaded | Threaded | Whole Thread (14) | Ignore Thread Prev | Next
Author: Jeanwa Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121317  
Subject: Re: Inventory is income? Date: 9/25/2012 1:02 AM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 1
What the example boiled down to (in my apparently muddled thinking) is that the poster was saying the equivalent of "unsold inventory = taxable income".


I should have said gross income, using net income was poor terminology on my part. I assumed, incorrectly that there were no other expenses.

Well, it is a bit more complicated than that. The left over inventory is really gross profit (some call it Profit from Sales and some call it Gross Margin)

From that we subtract all the other expenses. Utilities, Rent, insurance, etc.

Total Sales 200.00

Beginning inventory 0.00
Purchases 100.00

Ending inventory 25.00
__________
Cost of goods sold 75.00

Gross profit from Sales 125.00

Utilities 10.00
Rent 10.00
Insurance 10.00

Total Expenses 30.00

Net income 95.00



Does that help?

I still wish I could say it better.


If that were true, then each home buyer would record the sales price of the home as income the year of its purchase. After all, you know you're going to sell the home later, right? So if you haven't sold it, it's "unsold inventory".

You really can't make a comparison to a house. That said, in prior years the gain on the sale of a home was a capital gain. So people did keep track of what they purchased the house for, added the improvements they made. When they sold the Sale price minus the cost and improvement cost was capital gain income.

Technically. for example, if you sell your car at more than you paid for it you should report the difference as a capital gain.

FWIW, I'm glad you came here to verify what I said. I wish more posters did that.

Jean
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (14) | Ignore Thread Prev | Next

Announcements

Disclaimer:
In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
Pencils of Promise - Back to School Drive
"Pencils of Promise works with communities across the globe to build schools and create programs that provide education opportunities for children."
Post of the Day:
Berkshire Hathaway

IBM: Is Buffett Wrong, or Brilliant?
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement