For help with your COGS accounting, view our inventory services page: ledgergurus.com/ecommerce-accounting-services/inventory-management-for-ecommerce/?RUclips&
I hope this example helps: I use Accrual meaning when I purchase inventory, it goes on my inventory sheet but does NOT go on anything else so its not an expense till it actually sells. When that item sells, then I put it on my COGS and charge the expense at that time. My friend buys inventory and immediately writes it off, even if it never sells and sits for years... I like my method because she had a huge LOSS last year (cannot be carried over) then when all of the inventory sold this year, she has to pay taxes on all those profits and did not have much by way of expenses since she already wrote them off the previous year. With me only writing off what actually sold then I can better balance each year and try to have enough expenses to balance the losses to break even.
Hi! This comment was super helpful to me! I was wondering if you might be able to explain in a little bit more detail around COGS. Say this is your first year reselling but you have inventory that was purchased over the last 10 years (mostly personal items) how do you prove your COG for those items? do you just estimate?
For cash-basis method, when you purchase inventory at one price and sell it to a customer for a higher price, what account would that cost of inventory that sold go to since apparently it doesn't go to COGS unless it's accrual?
It sounds like you have quite a few inventory accounting related questions. The best way to get those answered is to schedule a consultation. You can schedule that here - calendly.com/ledgergurus-bd-team/ecommerce-accounting-consultation
I am a sole proprietor and use cash-basis. Or so I thought. Or at least that's what my CPA requests my financial statements in, instead of accrual-basis. But I see zero COGS on my P&L statement when I run the report as cash-basis and now I'm royally confused. What exactly are the journal entries for purchasing of inventory (cash basis)? Not raw materials or anything like that. I mean like.. Inventory purchased as an already Finished Good. I thought when you buy inventory that you later sell, the journal entry is always a Debit to Inventory (Asset) and a Credit to Cash (or A/P or whatever way you pay). I thought that the difference between accrual basis and cash basis is when you record the sale (accrual-basis being where you record sale now and cash-basis being where you record the sale when the customer actually pays you).
It sounds like you have quite a few inventory accounting related questions. The best way to get those answered is to schedule a consultation. You can schedule that here - calendly.com/ledgergurus-bd-team/ecommerce-accounting-consultation
Use the Amazon transaction report. You can find this report in Amazon Seller Central under Payments>>Date Range Reports. When you click "Generate Report" you'll have an option to pull a Summary or Transaction report--you'll want the transaction report. Here you will be able to collect the information you need. If you are looking for further guidance, please reach out to us here: ledgergurus.com/services/cogs-accounting/
I use Accrual meaning when I purchase inventory, it goes on my inventory sheet but does NOT go on anything else so its not an expense till it actually sells. When that item sells, then I put it on my COGS and charge the expense at that time. My friend buys a doll and immediately writes it off right, even if it never sells and sits for years... I like my method because she had a huge LOSS last year (cannot be carried over) then when all of the inventory sold this year, she has to pay taxes on all those profits and did not have much by way of expenses since she already wrote them off the previous year. With me only writing off what actually sold then I can better balance each year and try to have enough expenses to balance the losses to break even.
For help with your COGS accounting, view our inventory services page: ledgergurus.com/ecommerce-accounting-services/inventory-management-for-ecommerce/?RUclips&
I hope this example helps: I use Accrual meaning when I purchase inventory, it goes on my inventory sheet but does NOT go on anything else so its not an expense till it actually sells. When that item sells, then I put it on my COGS and charge the expense at that time. My friend buys inventory and immediately writes it off, even if it never sells and sits for years... I like my method because she had a huge LOSS last year (cannot be carried over) then when all of the inventory sold this year, she has to pay taxes on all those profits and did not have much by way of expenses since she already wrote them off the previous year. With me only writing off what actually sold then I can better balance each year and try to have enough expenses to balance the losses to break even.
That is definitely one of the benefits of accrual accounting. Good job!
Hi! This comment was super helpful to me! I was wondering if you might be able to explain in a little bit more detail around COGS. Say this is your first year reselling but you have inventory that was purchased over the last 10 years (mostly personal items) how do you prove your COG for those items? do you just estimate?
@@melaniestachowiak2090 If you don't have receipts, you'll have to estimate it.
Hi, can you convert from accrual to cash? if yes, what the process? thanks.
We wrote a blog all about that. You can find it here: ledgergurus.com/should-i-use-cash-or-accrual-accounting/.
For cash-basis method, when you purchase inventory at one price and sell it to a customer for a higher price, what account would that cost of inventory that sold go to since apparently it doesn't go to COGS unless it's accrual?
It sounds like you have quite a few inventory accounting related questions. The best way to get those answered is to schedule a consultation. You can schedule that here - calendly.com/ledgergurus-bd-team/ecommerce-accounting-consultation
I am a sole proprietor and use cash-basis. Or so I thought. Or at least that's what my CPA requests my financial statements in, instead of accrual-basis. But I see zero COGS on my P&L statement when I run the report as cash-basis and now I'm royally confused.
What exactly are the journal entries for purchasing of inventory (cash basis)? Not raw materials or anything like that. I mean like.. Inventory purchased as an already Finished Good.
I thought when you buy inventory that you later sell, the journal entry is always a Debit to Inventory (Asset) and a Credit to Cash (or A/P or whatever way you pay). I thought that the difference between accrual basis and cash basis is when you record the sale (accrual-basis being where you record sale now and cash-basis being where you record the sale when the customer actually pays you).
It sounds like you have quite a few inventory accounting related questions. The best way to get those answered is to schedule a consultation. You can schedule that here - calendly.com/ledgergurus-bd-team/ecommerce-accounting-consultation
Are FIFO and Averaged COGS considered accrual accounting methods??
Yes
In a hypothetical pure cash basis universe, there is no COGS because COGS is not a cash outflow
which amazon report i use to enter month end inventory journal ?
Use the Amazon transaction report. You can find this report in Amazon Seller Central under Payments>>Date Range Reports. When you click "Generate Report" you'll have an option to pull a Summary or Transaction report--you'll want the transaction report. Here you will be able to collect the information you need. If you are looking for further guidance, please reach out to us here: ledgergurus.com/services/cogs-accounting/
I'm still confused
I understand. This stuff can be confusing. Do you have any specific questions we can help you with?
I use Accrual meaning when I purchase inventory, it goes on my inventory sheet but does NOT go on anything else so its not an expense till it actually sells. When that item sells, then I put it on my COGS and charge the expense at that time. My friend buys a doll and immediately writes it off right, even if it never sells and sits for years... I like my method because she had a huge LOSS last year (cannot be carried over) then when all of the inventory sold this year, she has to pay taxes on all those profits and did not have much by way of expenses since she already wrote them off the previous year. With me only writing off what actually sold then I can better balance each year and try to have enough expenses to balance the losses to break even.