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Acct 101 COGS


ILLMAS
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Who is correct?

Books


Revenue 15K

COGS 10K

Gross Profit 5K

Ending Inventory 3k

Per tax

Same as above but taking beginning inventory of 2K in account 

Beg Inv 2k

COGS 10K

End Inv 3k

Purchases 9K

Gross profit is now 6K

Bookkeeper says the gross profit is incorrect on the tax return, but I am having a hard time making them understand inventory.

 

 

 

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Can't tell which is correct unless you tell us if books/general ledger reflects change in inventory during year or if "COGS" on books is really just purchases and other costs in that category

If the $10K in COGS on books is truly only purchases/other costs and doesn't reflect the increase in inventory during the year, then the COGS should end up being $9K and GP is $6K. 

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You probably need to compute purchases from COGS on P&L by subtracting BI and adding EI. This is what you have to do with QuickBooks because they net BI+Purch-EI into one line called COGS.

In other words, purchases s/b 11k on the tax return.

The balance sheet won't balance in the TR if you get it wrong.

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10 hours ago, TAXMAN said:

And I thought I was the only that still use the old T-Accounting. Makes things easy to trace.

Sometimes it's the fastest and best way to figure out what really happened. If I can trust the individual QB transactions, and the issue is what QB does with them behind the scenes in its reporting, I'll use totals from individual accounts, pop 'em into T-account structure, and trace how to report. Faster than excel and is visual rather than weird excel formulas that have to be ever-so-carefully typed in.

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4 hours ago, kathyc2 said:

Control/y will show you the QB journal of a transaction. 

Thank you, and I'll keep that shortcut in mind. But what is needed for reporting is what QB should have done with the transaction, not what it did do. If I'm not being paid big bucks (and not in the last week of tax season) to fix the QB file, I just need to know the transaction totals and can then get my own, correct, reports for myself.

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9 hours ago, jasdlm said:

Green columnar pads are one of my absolute favorite things. The more columns, the better.

Have you heard of Excel? It's a computerized columnar pad. No pencils required AND it does the math for you! How cool is that.

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14 hours ago, Abby Normal said:

Tractor fed, dot matrix.... triggers my PTSD! Remember sound proof cases over dot matrix printers because you'd damage your hearing without it?

Taping 6 of them together because my QuatroPro spreadsheet was so large and there was no way to "shrink to fit" on that program and printer combination.   2 pages wide and 3 pages long.

Tom
Longview, CA

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I had an inch-thick dense foam pad under my dot matrix printer to muffle the noise. And, I used all of those software. I still have a stack of green pads in multiple sizes, including a few extra, extra wide ones!

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6 hours ago, Abby Normal said:

Have you heard of Excel? It's a computerized columnar pad. No pencils required AND it does the math for you! How cool is that.

I have clients I have taken OFF of excel and put back ON green ledger paper. Some people can't be trusted with a computer. Heck, some people can't be trusted with a smartphone! 

Just barely managed to stop myself from sending a very snarky comment to a client who sent info using excel. Supposedly smart young man, sent a jumbled mess of intermingled garbage. The snarky comment was "ever heard head of SUMIF?"

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6 hours ago, Abby Normal said:

Have you heard of Excel? ...AND it does the math for you! How cool is that.

 

Uh huh, and I've had clients use Excel as a word processing program, typing in the columns and typing the totals, making it appear as if they'd used the built-in functions. Only problem was that their math had errors throughout, and it was supposedly the company's disbursements summary that I was trying to post to my worksheet.  It was a pretty printout though. 😆

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2 hours ago, Catherine said:

And I've had clients use Word as a spreadsheet program with inserted tables. 

It's not pretty.

Oh man, I hate that. I usually figure out how to get it into excel so I can check (and fix) formulas. Never trust a client's spreadsheet and never accept just a printout of a spreadsheet.

Half of the spreadsheets I get, the totals are not formulas. People are adding it up on a calculator and entering totals. :wall:

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