I have a craft business where I have inventory. The question asked, How do you account for inventory? Cost, Lower Than Cost or Market Value, Other

[bridget14-41]

Can you explain the cost method in detail for a craft business with inventory, please?

[KatherineC]

The Cost method of valuing inventory is based on the actual cost of buying the items or buying materials for making the items that you carry in inventory.  In other words, cost basis would be what you paid for those items.

Lower of Cost or Market compares the cost (defined above) the market value of each item.  If the market value is less than the cost, you would adjust the value of the item to equal market value.