This is my first year with TT (always used a CPA), so I'll need to watch out to make sure this causes no issues with my Balance Sheet. To correct that (and maintain fidelity with QB), I just zeroed out beginning and ending Inventory. Yet TT added $7,000 to my COGS, making it $343k. The average cost is the sum of the cost of all of the items in inventory divided by the number of items. That $7,000 in vanishing inventory is already included in my COGS. QuickBooks uses the weighted average cost to determine the value of your inventory and the amount debited to COGS when you sell inventory. For example, at start of 2017 I had Inventory of $18,000, at end I had $11,000. The questioner has only one calculation to make: "How much did I pay for the items I sold last year." Am I missing something? The reason why I came to this answer, is because I had a question of why TT includes Inventory beginning and end in its COGS step-by-step calculation. As you said, "But I can only deduct from the current tax year's income, the cost of what I actually sold in that tax year." COGS is as simple as that. What confused me about your answer is why you would bring in inventory into the picture. I would suggest that the answer to the original question should be simpler: Yes, you need to figure out the cost for the inventory that you sold during the tax year. It also shows that I sold $1000 of that inventory, and in that same tax year I purchased an additional $5000 of inventory leaving me a total of $9000 of inventory left at the end of the year. The above indicates that I started the year with $5000 in inventory. But I can only deduct from the current tax year's income, the cost of what I actually sold in that tax year. Note that it flat out does not matter in what year I purchased that inventory either. The $1000 is what "I" paid for the inventory, it is NOT what I sold it for. Navigate to the financial tab and click accounts from the drop-down menu of financial tab. Select the File tab from the list of menu option in preferences. Now pick the Company option under Preferences. First you have to open QuickBooks Point of Sale. The above indicates that I sold $1000 worth of my inventory in the tax year. You are asking about landed cost, and to do landed cost in QB requires a work around. Method 2: Make Sure that the Correct Cost of Goods Sold Account is Set up Under Settings. Although this form is not necessary, the tax return can help your accountant get familiar with the financial health of your business. So here's a few examples, followed by explanations.Ĭost of Goods Sold $1000 (What *YOU* paid for the inventory) For optimal small business tax preparation, share a copy of last year’s tax return with your accountant. ![]() ![]() If it doesn't, then you must explain to the IRS why it does not. Also, the End of Year (EOY) inventory balance must match the next year's Beginning of Year (BOY) inventory. Basically, when you purchase inventory, you can not deduct what *you* paid for that inventory, until the tax year you sell that inventory. COGS can be confusing - especially if one over thinks it.
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