Maria644
Returning Member

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Because I am a small business that makes under $26 millions my understanding is that I can follow the cash basis accounting method and deduct the entire $2,500 which was my total expense of the year per my example.  How do I deduct the remainder $2000?

I am an online retail (if that helps).

 

1) If you are maintaining an inventory, use the COGS section only: 

BOY $0 + Purchase $2,500 - EOY $2,000 = COGS $500... where do I deduct the other $2,000 since my total expense of the year was $2,500?

 

2) If you are not maintaining an inventory, use "Supplies" as an expense (based on what you sold) and do not enter any figures in the COGS section.

Supplies sold: $500.... where do I deduct the other $2,000 since my total expense of the year was $2,500?