Most of your assumption is correct, Let's break this down.
- Beginning of Year (BOY) Inventory: $10,000
- Purchases: $2,000
- Total Inventory Available: $12,000 ($10,000 + $2,000)
- End of Year (EOY) Inventory: $3,000
- Cost of Goods Sold (COGS): $9000
- Sales $8000
- inventory loss $1000.
You're correct that the $1,000 lost inventory is already included in your COGS. Your initial calculation reflects that your EOY inventory is less than expected because of the lost inventory. This loss affects your COGS directly and as a result, your is Profit=$8,000−$9,000=−$1,000. This is not a $1000 profit that you mentioned but a loss of $1000.
You cannot separately deduct the lost inventory as a business expense because it’s already accounted for within the COGS. The loss has already affected your profit or loss directly and adding this as an additional business expense would be like claiming the same loss twice. You are not allowed to double-dip.
@dhoddy
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