How do I enter my cost of goods sold expenses if i dont have inventory?

[judybrewster74]

What for is this?

[judybrewster74]

What form is this

[deborahcrawford]

where is the cost of goods located

[DawnC0]

Use this link to post a new question.  More folks will see it and you will get an answer much faster.  This thread is 2 years old...;)  

[DawnC0 · Accepted solution]

Cost of Goods Sold is part of your Inventory account.  If you do NOT carry an inventory, use 0 for beginning and ending inventory amounts.  The full amount of your purchases, materials, and supplies will go to Cost of Goods Sold.  See image attached for example of materials expense in COGS. 

If you DO keep an inventory, you enter your beginning and ending inventory counts as well.  Here is how COGS is calculated:

Cost of Goods Sold = Beginning of Year Inventory + Purchase Costs During the Year - End of Year Inventory.

You then use Cost of Goods Sold as your "costs" over the year.  To take an example, suppose you had $5,000 in merchandise at the beginning of 2016.  Your purchased products worth $18,000 over the year, and you have $4,000 in unsold merchandise at the end of the year.  Your cost of goods sold is $5,000 + $18,000 - $4,000 or $19,000.  If you started the year with no inventory in this example, your cost of goods sold is $14,000, and you carry over the unsold merchandise to the following year.

[Edited 04/10/18 15:23]

[apadmajarao]

Hi,

In last couple of years, I have used the Cost of Goods Sold method to account for my inventory.

I have now decided to wind up the business(Sole Proprietorship - schedule C).

I am trying to sell the remaining inventory on a sale.

In case I am not able to sell it, how do I account for the unsold inventory?

Thank You!

[Critter]

Depends on what you do with the inventory. Usually it's converted to personal use and you can use a charitable deduction if you give it away to a qualifying charity.

You should try to liquidate the inventory as you are closing the business. Even if you only get pennies on the dollar you'll be able to bring your inventory to 0 on your cost of goods sold.

[pbr]

does that unsold carry over inventory become a opening inventory.  Also do you have to file a 3115 if the previous year the cost of goods section was not used?

[Critter]

If you were expensing the inventory every year and NOT using the inventory section then do not change now.  

[pbr]

I am under the assumption that if I change, I will have to file a 3115, which is quite a form.  I was hoping that the new tax law that took effect in 2018 would benefit me.  I am a small business with less the ten thousand dollars in sales.  Thanks for the help.

[Critter]

I am confused ... if you have been expensing inventory in the year of purchase why would you ever want to change that unless you were required to do so ???   The threshold for being forced to change is 1 million in sales per year ... you are nowhere near that amount.  You have nothing to gain by making any changes. 

[pbr]

thanks for your help

[Carl]

If your business does not carry inventory, then why did you tell the program it did? That's the only way the program would be asking you for cost of goods sold. See attached screenshot to understand.

If your business did have inventory on Jan 1 of the tax year, then you "MUST" show it's complete and total disposition as part of your closure process. Any unsold inventory *MUST* be shown as removed for personal use. Then your "cost of goods sold" for that inventory will be zero, since you removed it for personal use and did not sell it in 2019.