Yes, the default to Material and Supplies is correct. Since you are using QuickBooks for your small business, it is important you make sure your transactions are categorized correctly before importing them to your Tax Return.
Therefore, you will need to correct the incorrect categories in QuickBooks, then you can manually fix them in your tax return. QuickBooks will at times provide suggested categories, but you as the owner of the business must review the transaction and related profit and loss to make sure everything looks correct.
Also, make sure your Cost of Goods Sold correctly shows the correct ending inventory. See the guidelines below:
If your business produces income by manufacturing, selling, or purchasing goods, you can deduct some of your expenses in the Cost of Goods Sold section of your Schedule C. In order to complete this section, you will need to input your beginning and ending inventory amounts. Expenses that are included in the Cost of Goods Sold cannot be entered as both business expenses and cost of goods sold expenses.
4 types of expenses used to figure the cost of goods sold:
- Cost of products or raw materials (this includes freight)
- Storage
- Direct Labor Cost for workers producing products (includes contributions to pensions and annuity plans)
- Factory Overhead
See the link below:
Cost of Goods Sold
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