Inventory Question

Forum|Forum|6 years ago
February 10, 2020
2 replies
67 views

@Jester32t I do not answer questions posted privately.

Bottom line: Your 2019 beginning of year inventory balance *must* match *exactly* your 2018 end of year inventory balance. If it does not you'll have some 'splainin' to do to the IRS, and they flat out will not accept "any" reason or excuse you may provide them.

Best answer by Anonymous_

Hahah well regardless of interface I need the expert advice!

So if I could clarify or confirm what you are saying. If my BOY inventory was 46k for 2019, my end of year inventory for 2019 would be 46k + any new cogs - 2019 sales? Does this maintain the same thought process? Or am I simplifying or thinking about it wrong?

@Jester32t wrote:
Or am I simplifying or thinking about it wrong?

You only have to do an internet search for "cost of goods sold formula" to discover the one that is virtually universally accepted and relatively simple:

Beginning Inventory (at the beginning of the year)
Plus Purchases
Minus Ending Inventory (at the end of the year)
Equals Cost of Goods Sold

EX:

$14,000 inventory at the beginning of the year

+ $8,000 purchases during the year
- $10,000 ending inventory

= $12,000 cost of goods sold.

Jester32t

Level 2

Okay thanks. How do I post publicly?

Carl

Author

Level 11

BOY Inventory balance - What *you* paid for the inventory in your physical possession on Jan 1 of the tax year. It does not matter what year you paid for it either. If this is your first year of dealing with inventory, then this balance "must" be $0. If this is not your first year then the balance must match exactly your prior year's EOY inventory balance.

EOY Inventory balance - What *you* paid for the inventory in your physical possession on Dec 31 of the tax year. It does not matter in what year you paid for it either.

Cost of Goods Sold (COGS) - What "you" paid for the inventory you actually sold during the tax year. In what year you paid for it does not matter.

Example:

BOY Inventory balance $5000

EOY Inventory balance $9000

COGS - $10,000

The above indicates that you started the tax year with $5000 of inventory in your physical possession on Jan 1. During the year you purchased an additional $14,000 of inventory bringing the total to $19,000 for the tax year. During that same year you sold $10,000 worth of inventory leaving you with an EOY balance of $9000.

Carl

Author

Level 11

Oh, and you just did post publicly BTW. Instead of clicking an screen name, select the "Ask a Question" button to start a new thread. At this point, you don't need to start a new thread and so long as we continue on the same subject, you can just click the REPLY button at the bottom of "this" post.

ASK A QUESTION will start an entirely new thread.

REPLY will add your post to the existing thread you are replying to.

I myself think this "new" interface sucks. But then we all know what opinions are like. 🙂