Then at year end this journal will give you all you need to prepare your return. then when you sale the item record the date sold, the sale price, date purchased, who you purchased it from, the amount paid, and a brief description of the purchase. everytime you buy or obtain something you want to resale record it in the journal. it can be either computerized or just a paper journal. my suggestion is to start a spreadsheet for this. if not you are wise to seek guidance from whatever sources you can.

Hi can you say if you use an accountant to prepare your return? if yes i suggest you follow their guidance. If that is something you are 'bound to mess up', then what alternative method of inventory accounting would you possibly think would be easier? The accrual method would require you to (a) determine a GAAP method for valuing your inventory, (b) determine a GAAP method for tracking your inventory, (c) valuing your inventory each year to determine COGS, and (d) using the same method each year.Īll that is required for the cash method is to keep a log of your purchases, and then put a check mark next to them as they sell and record the COGS as an expense. The accrual inventory idea of recording an item at time of purchase but only counting it as an expense when it sells sounds like the sort of thing I'm bound to mess upįirst off, what you are describing - expensing inventory at the time of the sale - is not the accrual method of accounting for inventory.

There is no 'the way.' There are many correct and legal ways to account for inventory. If anybody can help, I'd really welcome it. If it makes a difference for answering my question, we're officially a Sole Proprietorship (though we qualify and file under the exception for Qualifying Joint Venture). It could be months or years in b/n those dates.īut, I'm not sure I'm allowed to be recording it as a straight expense on the day I buy the gewgaw, and as income on the day I sell it either. The accrual inventory idea of recording an item at time of purchase but only counting it as an expense when it sells sounds like the sort of thing I'm bound to mess up. We have yet to officially turn a real profit, so the distinction b/n whether we're profiting over or under any particular dollar amount is moot.īut, I want to be doing this the CORRECT and LEGAL way this year and going forward. Some sources out there in the web say I'm doing this exactly right. I've predominately been recording these purchases over the previous two years as Expenses/Materials & Supplies and counting them as such on my Schedule C. But we keep track the best we can by using QuickBooks Self Employed. Thrift shops, yard sales, auctions, estate sale, some lady in the parking lot.you get the idea. We buy things here, there, and everywhere throughout the year. The one area that has me utterly baffled is the where, when, and how of recording and reporting our inventory.

We are now starting our 3rd year as a very small business selling a wide variety of items on eBay.Įach of the previous two years has been a learning experience when it comes to tax time and I find that I could have kept better records.īut, I keep improving. Been there, tried that, and now I'm coming to my peers.

I point that out just so someone helpfully tells me to 'Google it' or the like. First, let me say that I'm only coming here with this question after scouring the web (webpages, blogs, forums, IRS pdfs, social media, etc.) w/out finding a solid and straight-forward answer to my questions.

Cogs accounting for etsy