"I'm not sure why you would record the finished product in an income account."
Because my accountant set up my original QB Retail that way in 2009. I'm not an accountant - I didn't know this might be a mistake.
What seems logical to me is that if I allocate a cap, a bottle, the paint to fill it, and a label to Supplies (COGS), then when it is sold as a finished product, it will then debit Supplies (COGS). What is left over is profit.
Is this correct, or is my logic not sound?
The total line item for COGS on my yr end balance sheet was, let's say $19,800. Gross sales were $40,000. Where I was getting stuck, and scared for doing my taxes was in the fact that the sub-accounts under COGS (Packaging, Supplies, Materials, and Shipping) individually only added up to $6600. This was leaving me with a staggering self employment tax to pay. Only when I plugged in the entire COGS total ($26,300) did I arrive at a reasonable amount on my Federal return.
What is scary is, when I do Quick Report on COGS (the large line item) I see a listing of every single retail sale made in 2022 in addition to all of the Supplies, Materials, and Packaging purchased in 2022. Does this sound right to you?
