topic Re: Recording Stock for Tax Reporting in Selling

Recording Stock for Tax Reporting

class_c_clothing — Tue, 22 Mar 2022 10:14:24 GMT

Any advice...I keep my Excel income and expenses spreadsheet but not sure if I should record all stock as I buy it as a monthly expense or just the cost of the actual items I sell and then keep the cost of remaining stock at hand as a separate thing?

Re: Recording Stock for Tax Reporting

jellybirddesigns — Tue, 22 Mar 2022 12:32:05 GMT

Definitely record the dollar amount you are purchasing as this figure is given as expenses to your accountant.

I also keep an Excel spreadsheet which is super handy come tax time.

In a nutshell, I -

Record each months gross sales

Record each months' purchases of fabric/stock etc

Run a transaction report each month to get the fixed and variable fees.

Of course, items that I purchase this month may not sell until later in the year, but I just tally it all up and give to my agent.

Re: Recording Stock for Tax Reporting

p9games — Tue, 22 Mar 2022 23:14:36 GMT

First thing's first - Don't ask strangers on the internet for tax advice - ask your accountant.

In saying that I have two pieces of advice. Depending on scale - spend the money and use Xero or MYOB etc to do your reconciliation. Put everything through a single bank account linked to your software, so you just login, you'll see your transactions and you can allocate them to various cost centres, attach receipts and so on.

Two - purchases of inventory are NOT AN EXPENSE. You do not get to claim purchases of inventory as a tax deduction or an expense. The only time you can claim the inventory cost as an expense is when you sell the item - Cost of Goods Sold. Unsold inventory is an asset, it sits on your balance sheet. It is not an expense. You may end the year thinking you've made a modest profit because you've been investing in inventory, but that asset value will be deemed as profit and you'll be taxed on it.

Re: Recording Stock for Tax Reporting

davewil1964 — Wed, 23 Mar 2022 06:36:00 GMT

Stock is capital, jelly, and only deductible upon sale. It IS possibly able to be depreciated.

That's why businesses have stocktake sales. It means they can claim the costs in the current tax year. And also save wages for staff not having to count things.

As p9 said, I don't claim to be an accountant, so this advice is general. But correct.

Re: Recording Stock for Tax Reporting

folosite — Tue, 29 Mar 2022 00:48:54 GMT

sorry but I could not stop 😂 at this

"That's why businesses have stocktake sales. It means they can claim the costs in the current tax year"

yes, you sure can, but you also have the income from those sales so basically the profit goes up and so is the tax

that's not why business have these

only way these would help with tax is if you sell the stock in June and get paid in July, but then all you do is moving the tax into next year

Re: Recording Stock for Tax Reporting

davewil1964 — Tue, 29 Mar 2022 07:53:32 GMT

You're less of an accountant than I am, it would appear. The carry-over costs of stock (capital) are less, and the tax on the 'extra' profit would be minimal compared to demurrage.

Re: Recording Stock for Tax Reporting

domino-710 — Tue, 29 Mar 2022 08:05:20 GMT

LOL - you are now into shipping.??

Re: Recording Stock for Tax Reporting

folosite — Tue, 29 Mar 2022 09:56:53 GMT

"You're less of an accountant than I am, it would appear. The carry-over costs of stock (capital) are less, and the tax on the 'extra' profit would be minimal compared to demurrage."

This gets better and funnier - The carry-over costs of stock (capital) are less - this is an everyday expense, has nothing to do with tax time, you can do sales anytime of the year if you want to clear stock to pay less storage fees. That's not the reason for a stocksale in June

the tax on the 'extra' profit would be minimal compared to demurrage - so, the extra tax will be lower than charge payable to the owner of a chartered ship on failure to load or discharge the ship within the time agreed - at least that's what demurrage means

you said "That's why businesses have stocktake sales. It means they can claim the costs in the current tax year" - which makes no sense. The more you sell, the more tax you pay. Period.

Don't try to spin it now, trying to look smart, just go back to school

Less of an accountant

Re: Recording Stock for Tax Reporting

p9games — Tue, 29 Mar 2022 12:48:17 GMT

>>> The more you sell, the more tax you pay. Period. <<<

This is categorically not true. Sales (stocktake or otherwise) often result in products being sold below cost. Selling a product below cost will REDUCE your tax liability.

There are many reasons why one might want to do that.

Improving cash position.
Clearing obsolete products.
Making space for new inventory in stores or warehouse.
Hitting supplier rebate targets

Your reply is exactly why sellers should not be seeking financial or accounting advice from anybody other than trusted professionals.

Re: Recording Stock for Tax Reporting

folosite — Tue, 29 Mar 2022 22:18:53 GMT

I'm been involved in retail for last 15 years, from online to big chain sores and i can assure you, stocksales, where products are sold under cost, are not even 1%

Even clearance and close down sales with 80% discount , most of them, are still selling with profit

and this debate was not regarding accounting issues or advice but for the reason why stocksales are done

And your point and mine is the same.

My point was that stocksales are NOT done to reduce your tax, that would be stupid.

Re: Recording Stock for Tax Reporting

whoisbiggles — Wed, 30 Mar 2022 01:37:09 GMT

FWIW - my sales spreadsheet looks like this:

Item Description	Sale price	postage received	total proceeds	ebay fee	postage cost	I paid	net profit	sale date
	$249.00	$0.00	$249.00	$27.39	$30.00	$110.00	$74.83

I have all my stock listed on the one spreadsheet. At tax time I filter on the sale date to capture the yearly sales for my tax return.

I am sure there are different ways - this is simple enough for me to manage.

I only use Mypost business for postage - which I download the yearly report to tie back into my spreadsheet if I ever have to prove to the ATO my postage costs.