# Cost of Goods Sold?



## gijoe985 (Sep 15, 2009)

So I posted this in the business section, but then figured I might get a better/quicker answer here-

"So, I am just curious if there is a simpler way to calculate my cost of goods sold when concerning plastisol transfers. I have like 10000 transfers and it would be very time consuming to count them all for inventory. Can I just base it off of the shirts sold and then factor in a % for wasted ones?"


----------



## binki (Jul 16, 2006)

Use the cash accounting method and write it off when you buy them


----------



## gijoe985 (Sep 15, 2009)

Hmm, how would you say that works when I buy in very large bulk? Like 2 year supply...


EDIT- Well, after taking a second to think, I guess it'd work fine, I'd just have no inventory to write off at a later date. 

Is it possible to use case based accounting for one thing and accrual based for another (shirts)?


----------



## gijoe985 (Sep 15, 2009)

IRS Publication 334 seems to say that you are supposed to use a accrual method if you are going to maintain an inventory, but the below quote is helpful. Seems like I can just find a general method that works, but doesn't require counting 15k transfers. 

"If you are a producer, you can use any reasonable method to estimate the raw material in your work in process and finished goods on hand at the end of the year to determine the raw material used to produce finished goods that were sold during the year."


----------



## binki (Jul 16, 2006)

Nobody is coming after you if you buy this stuff and hold it. It will be a pita to keep track of. 

What you can do is do cash accounting for taxes and accrual for your p&l


----------



## gijoe985 (Sep 15, 2009)

binki said:


> Nobody is coming after you if you buy this stuff and hold it. It will be a pita to keep track of.


I agree that it would be a pain, but I am just being cautious in case of audits. I am feeling a bit overly cautious this year because I had a very large amount of legitimate charitable giving, but either way, it makes me a higher target for an audit. 

I see what you are saying though about it being legit. I figure if I count my transfers as an expense this year, and don't count them in the future, it isn't like I am trying to be sneaky. I'm just missing out on a write off next year.


----------

