I have an S-corp using cash accounting. My beginning inventory for 12/31/16 was $
8,468. I don’t use quickbooks inventory
for tracking purposes and my physical count of inventory on 12/31/17 was $
15,582. I created a journal entry ( $
7,114) to adjust year end 12/31/17 inventory to the new amount $ 15,582.
My Quickbooks P&L shows a COGS of $ 33,795. Turbo Tax subtracts the $ 7,114 increase in
inventory from my COGS making my Turbo Tax COGS $ 26,681. Since this decreases my COGS my Turbo Tax Net
Income goes up by $ 7,114, to $ 16,660.
During the Reconciliations and Balance Sheet step of turbo
tax (my state requires a balance sheet for tax purposes) the two items that keep my book income from
being equal to my turbo tax income are the
$ 7,114 inventory difference and a $1,508 disallowed meals &
entertainment deduction.
Turbo tax automatically inserted the disallowed meals
deduction on the 1120S Schedule M-1 worksheet and my question is do I enter the
inventory adjustment $ 7114 as an expense item on the M-1 worksheet? Turbo Tax
gives you a step to enter what it considers uncommon book/tax differences. Is this where I should enter the $ 7114 inventory
adjustment? And, what description should
I enter for it?
Why does turbo tax consider this an uncommon
difference? I would think any increase
in inventory over prior year end that is still in stock would always cause this
situation to occur and there would be a line item to reflect this difference on
the tax forms.
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