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schedule C inventory maecenasaliquam 01-23-2007
Posted by maecenasaliquam on January 23, 2007, 2:23 am
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 I have a small business & I am trying to figure out how to
do the inventory for my schedule C.

As I understand it, I'm supposed to figure the cost of the
inventory I have at the end of the year. I had quite a lot
of inventory at the end of the year, but I don't know how to
figure the cost.

I make small figurines and other knickknacks out of bins of
beads, hardware items and other things I find in stores (and
sometimes on the street). Each piece is unique, each one
costs me a different amount & frankly, I don't know how much
each costs. "Cost," as I understand it, is how much it
costs me to make them.

I assign them prices based on my labor & what I can recall
of the costs. I know, not very scientific, but what can I
do.

I'm afraid I'm just going to have to guess the cost of the
goods sold... perhaps a percentage. I'm just wondering if
there is an easier way. Is there?

I don't know why I can't just take my earnings & subtract
from them what I spent this year (the first year I've begun
keeping careful records) & call that my profit & just claim
that!

Mae

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Posted by lurker on January 24, 2007, 2:15 am
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 maecenasaliquam@yahoo.com wrote:

> I have a small business & I am trying to figure out how to
> do the inventory for my schedule C.
>
> As I understand it, I'm supposed to figure the cost of the
> inventory I have at the end of the year. I had quite a lot
> of inventory at the end of the year, but I don't know how to
> figure the cost.
>
> I make small figurines and other knickknacks out of bins of
> beads, hardware items and other things I find in stores (and
> sometimes on the street). Each piece is unique, each one
> costs me a different amount & frankly, I don't know how much
> each costs. "Cost," as I understand it, is how much it
> costs me to make them.
>
> I assign them prices based on my labor & what I can recall
> of the costs. I know, not very scientific, but what can I
> do.
>
> I'm afraid I'm just going to have to guess the cost of the
> goods sold... perhaps a percentage. I'm just wondering if
> there is an easier way. Is there?
>
> I don't know why I can't just take my earnings & subtract
> from them what I spent this year (the first year I've begun
> keeping careful records) & call that my profit & just claim
> that!

Are you saying that you do not have receipts for what you
paid?

My observations using QuickBooks is that prices change
through the year on the "same" item, or as I switch sources.
There are two important number that QuickBooks must
present.
1) Year end total cost (for tax and profit/loss determinations)
2) Average cost per item (for resale profit/loss margins per
item.) I find that often, as a source changes, the part
number also changes.

Since tax time is about item number (1), it makes perfect
sense that the sum of all the parts is used. Documentation
is a separate issue.

<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>

Posted by Paul Thomas, CPA on January 24, 2007, 2:15 am
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> I'm afraid I'm just going to have to guess the cost of the
> goods sold... perhaps a percentage. I'm just wondering if
> there is an easier way. Is there?

To be honest, for a business like yours, that's what they
have to do for a bulk of the inventory when there are "loose
parts". You can however, nail down any unopened bulk items
of materials and "inventory" as it's just a matter of
counting boxes x your cost in each.

But, unless your sales are more than one million, you can
account for your inventory using the cash method, meaning
that you can deduct your purchases.

See Rev. Proc. 2001-10.

--
Paul Thomas, CPA
paulthomascpapc@bellsouth.net

<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>

Posted by Harlan Lunsford on January 24, 2007, 2:34 am
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maecenasaliquam@yahoo.com wrote:

> I have a small business & I am trying to figure out how to
> do the inventory for my schedule C.
>
> As I understand it, I'm supposed to figure the cost of the
> inventory I have at the end of the year. I had quite a lot
> of inventory at the end of the year, but I don't know how to
> figure the cost.
>
> I make small figurines and other knickknacks out of bins of
> beads, hardware items and other things I find in stores (and
> sometimes on the street). Each piece is unique, each one
> costs me a different amount & frankly, I don't know how much
> each costs. "Cost," as I understand it, is how much it
> costs me to make them.
>
> I assign them prices based on my labor & what I can recall
> of the costs. I know, not very scientific, but what can I
> do.
>
> I'm afraid I'm just going to have to guess the cost of the
> goods sold... perhaps a percentage. I'm just wondering if
> there is an easier way. Is there?
>
> I don't know why I can't just take my earnings & subtract
> from them what I spent this year (the first year I've begun
> keeping careful records) & call that my profit & just claim
> that!

In a situation like yours, I would NOT include value of "my"
labor; just the actual material costs, which probably can't
be much, right? I think it reasonable to look at a piece and
use the "eye estimation method". (Oh.. about.. uh..
say... 67 cents in materials!)

ChEAr$,
Harlan Lunsford, EA n LA

<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>

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