# Are Transfers Considered Cost of Goods or an Expense?



## spankthafunk (Apr 9, 2007)

If I buy t-shirts and order custom plastisol transfers, are the transfers considered a cost of good sold, or an expense? I'm trying to do my own accounting and am not sure what to put this under.


----------



## wormil (Jan 7, 2008)

Cost of goods sold.


----------



## spankthafunk (Apr 9, 2007)

I thought so. Does that mean the ink you buy for screen printing is also a cost of good sold?


----------



## Girlzndollz (Oct 3, 2007)

Spank, are you sure you want to do your own accounting? You know, local community colleges sometimes offer one semester courses on Small Business Accounting, and alot of these basics, that could really help with. Maybe you should look into something like that, so you'd feel more confident what goes where. Just a thought. Best wishes.


----------



## wormil (Jan 7, 2008)

spankthafunk said:


> I thought so. Does that mean the ink you buy for screen printing is also a cost of good sold?


Yes. Ink for your office printer would be an expense. The way it was explained to me, cogs are consumables used directly in the manufacturing process. So anything that is depleted directly when making the shirts, ink, emulsion, reclaimer, films, are cogs. Items that are used up in the course of doing business, but not accounted per job, like office supplies, screen degreaser, squeegee blades, spot cleaner are expenses.


----------



## Liberty (Jul 18, 2006)

And by GAAP, production labor is also a Cost of Goods Sold.


----------



## Girlzndollz (Oct 3, 2007)

Do you see that reference to GAAP in the above post? That stands for Generally Accepted Accounting Principals. Look it up on Google. It's kind of like how the IRS has rules on how to file your taxes, those are the rules on how to handle your accounting... what's acceptable and what's not. Things have to go into the correct places. Best wishes to you.

Adding:
Here's a little background on Gaap:
http://en.wikipedia.org/wiki/Generally_Accepted_Accounting_Principles_(USA)


----------



## spankthafunk (Apr 9, 2007)

Yea I need to look into taking some small business classes. I'm just a very small sole proprietorship right now but I want to try and get everything as right as possible. I knew the shirts were COGS and I figured the ink was too, but I had no idea the other stuff would also be COGS like the emulsion and whatnot, i thought it was just whatever was used in the final product.


----------



## spankthafunk (Apr 9, 2007)

oh I'm sorry, one more. What about artwork?

(Either purchased online, through software, or by another person)


----------



## Liberty (Jul 18, 2006)

If you subcontract art services and the art is used only for that one job then it belongs in cost of Goods.

If you buy a clipart collection that you will use over and over then it is a Capital Purchase and is not even an Income Statement item. It goes on the Balance Sheet as such and you have options to Depreciate or Section 179 write-off.

You really are getting into areas that would be better off discussed with YOUR accountant. Yes, you need an accountant. If for nothing else but to get your chart of accounts setup and review periodically to keep you out of trouble.


----------



## spankthafunk (Apr 9, 2007)

But how much do accountants run? Im just a small time business, maybe doing 1 t-shirt order of 50 shirts a month or less


----------



## Solmu (Aug 15, 2005)

spankthafunk said:


> But how much do accountants run? Im just a small time business, maybe doing 1 t-shirt order of 50 shirts a month or less


If you're that small/new, and you're not a trained accountant yourself, then my advice would be to take the financial hit - either in the form of hiring an accountant, or in the form of not taking tax write-offs on anything that you don't fully understand how and when to write off.


----------

