The materials purchased are kept track of in Cost of Goods Sold. The gain is figured separately. Enter the total amount you made from sales in the income category. Enter expenses not related to those materials as expenses.
There are two basic types
of businesses in regards to this issue. If you make and/or sell merchandise you
would enter it in COGS as indicated below. If you merely have a service type of
business, you would enter it as an expense.
Per the IRS:
How To Figure Cost of Goods Sold
If you make or buy goods to
sell, you can deduct the cost of goods sold from your gross receipts on
Schedule C. However, to determine these costs, you must value your inventory at
the beginning and end of each tax year.
This chapter applies to you if
you are a manufacturer, wholesaler, or retailer or if you are engaged in any
business that makes, buys, or sells goods to produce income. This chapter does
not apply to a personal service business, such as the business of a doctor,
lawyer, carpenter, or painter. However, if you work in a personal service
business and also sell or charge for the materials and supplies normally used
in your business, this chapter applies to you.
TurboTax Calculates Cost of Goods Sold as
follows:
Beginning
Inventory
+ Purchases
=
Inventory Available For Sale
- Ending Inventory
=
Cost of Goods Sold
