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andresrossi
New Member

I purchased inventory in December 2017 and paid 30% The remaining 70% was paid in 2018. Do I deduct just the 30% or 100% of the purchase?

 
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LisaBr
New Member

I purchased inventory in December 2017 and paid 30% The remaining 70% was paid in 2018. Do I deduct just the 30% or 100% of the purchase?

If your business uses the cash-based method of accounting, use the amount paid in 2017 as expenses.  You will need to report the amount paid in 2018 in your 2018 taxes next year.

If you use an accrual-based method of accounting, you can use the entire amount paid in 2017

The choice between Cash versus Accrual accounting is a business decision.

Many businesses without inventories use the cash method because it is fairly simple. Farming businesses with gross receipts of $25 million or less, qualified personal service corporations, and entities with average annual gross receipts of $10 million or less, may use the cash method.

On the other hand, if you have inventory, need to track Cost of Goods Sold, and your business earned over $1 million in gross receipts in each of the past three years, you'll generally use the accrual method for sales and related costs.

If you don't have a compelling reason to use the accrual method, you are better served sticking with cash-basis accounting for simplicity, if for no other reason.However, most small businesses use the cash-based method of accounting.

From:  https://ttlc.intuit.com/questions/3152488-how-do-i-figure-whether-to-use-cash-or-accrual-when-i-do-t...

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1 Reply
LisaBr
New Member

I purchased inventory in December 2017 and paid 30% The remaining 70% was paid in 2018. Do I deduct just the 30% or 100% of the purchase?

If your business uses the cash-based method of accounting, use the amount paid in 2017 as expenses.  You will need to report the amount paid in 2018 in your 2018 taxes next year.

If you use an accrual-based method of accounting, you can use the entire amount paid in 2017

The choice between Cash versus Accrual accounting is a business decision.

Many businesses without inventories use the cash method because it is fairly simple. Farming businesses with gross receipts of $25 million or less, qualified personal service corporations, and entities with average annual gross receipts of $10 million or less, may use the cash method.

On the other hand, if you have inventory, need to track Cost of Goods Sold, and your business earned over $1 million in gross receipts in each of the past three years, you'll generally use the accrual method for sales and related costs.

If you don't have a compelling reason to use the accrual method, you are better served sticking with cash-basis accounting for simplicity, if for no other reason.However, most small businesses use the cash-based method of accounting.

From:  https://ttlc.intuit.com/questions/3152488-how-do-i-figure-whether-to-use-cash-or-accrual-when-i-do-t...

View solution in original post

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