I have a side business with about 20K of income a year. Mainly a service business. I do sell parts to people, but I keep no inventory on hand. When someone needs something I will order it and invoice them. I use the cash accounting method.
How do I handle cost of goods for something when for example I sell something at the end of the year. I order the part, and pay for it, but I do not receive the check until the next year.
Using the cash method, I wouldn't report the income until the 2020 tax year, but what about the cost of goods since I paid for the part in 2019.
but I keep no inventory on hand.
The parts you pay for can be considered and treated as a supply expense in you want, and you don't need to even mess with the COGS/Inventory section. However, you "can" use COGS to help you track what you pay for parts and the such. Is that what you desire to do?
I also don't maintain inventory, but only order parts "as needed". However, I utilize the COGS/Inventory section of the program for this, as I find it easier to keep track of the physical things I pay for, then immedidately re-sell to customers as part of the services I provide them.
I'd typically used the COGS section of the program to enter the parts I'd bought and sold. I'm just not really sure which year to count the expense/COGS on.
For my example, say I invoiced $100 to a customer on 12/1/19. That included a $25 part bought on 12/1/19 on credit card. I received payment for $100 in January 2020. Just an examaple