What other costs are considered Cost of Goods Sold?

Now if you were also assembling the product and you paid someone $5.00 to assemble it then the cost would rise to $6.50 per piece for the Cost of Goods Sold.


In another example you are a car dealer who sells used cars. Your cost of Goods Sold would be the price you paid for the car purchased, plus any parts and labor (mechanic repairs) you paid to make the car sellable. The total of these would then be your Cost of Goods Sold.

Basically any cost you put into the product to make it sellable is considered Cost of Goods Sold. This could be from buying paint to paint the product to the laborer who is applying it. But the cost has to be related directly to making product ready to sell.


Next Credit Card Purchases
By Alamo Bookkeeping Associates

Recording Purchases of Inventory

If you are selling a product, then the tracking of your inventory expenses are very important as this will probably be a primary expense for your business. Normally a purchase of inventory is also considered what is called Cost of Goods Sold. This phrase basically means what it says, the cost of the product that you sold. For example, you sell hair accessories and spend the following. $1.00 per piece and .50 cents for packaging. Therefore the cost of the goods you sold were $1.50 per piece. The inventory portion is the $1.00. The packaging is a Cost of Goods Sold expense.

The bookkeeping entry would be as follows. Debit Inventory Purchases for $1.00 packaging for .50, credit Bank Account (if paid thru bank).

But of course you would be buying in bulk so this number would be much higher.

Let’s say you are a used car dealer and buy cars at an auction to resell. You paid $1200 for an auto. The bookkeeping entry would be debit Auto Inventory and Credit to the Bank Account (if paid thru bank).


Next, what other costs are considered Cost of Goods Sold?

By Alamo Bookkeeping Associates

Record Recurring Expenses or Deposits on Bank Accounts

One of the features that Quickbooks offers is the ability to record a recurring transaction. In Quickbooks this is called a memorized transaction. This can be any kind of transaction such as a deposit or check. Setting up a recurring transaction can save you time over the year from having to re-enter transactions that repeat each month. Let’s say for example that you have a rental property and each month you receive a deposit at the bank for $200.00 from the tenant. Instead of having to record that deposit each month you can record it once, tell the system to record the same transaction once a month and for how many months.

Let’s take another example. Your insurance payment is automatically debited on your business bank account for $75.00 each month. You can set up a check payment in Quickbooks recording this recurring check for 12 months. This is a convenience that many people overlook as a way of reducing their data entry time. A good time to set these up is at the beginning of the year. 

By Alamo Bookkeeping Associates

Record Bank Transfers Between Accounts

Sometimes you need to record transfers between banks. This can be between two business accounts or from the Personal Account in the case of a Sole Proprietor to/from the business account. If the transfer is from one business account to the other, you record a debit to the account the funds are being transferred to, and a credit to the one being transferred from. For example, you transfer funds from the operating account to your payroll account. Debit the Payroll account and Credit the Operating account.

However, If you are transferring from your personal bank account to the business account, then this is considered an equity investment in your company. In this case you would debit the Operating account, where you are transferring the money to, and credit the Owner’s Equity account.

If you are transferring money from the business account to your personal account, this is considered an Equity Withdrawal. In this case you would do the opposite, debit the Equity account and credit the business bank account.

Provided by Alamo Bookkeeping Associates

How do I record Sales Tax?

If you have a business that has to collect sales tax, when you record your sales figures, there should be a separation for the portion of sales tax you are collecting from your regular sales. For example, you sell 10,000 in retail sales but with sales tax the total you collected was $10800. Your entry for bookkeeping purposes should be reflected as a debit to your bank account and the two credits, one to the sales account for $8000 and one to the sales tax liability account for $800. Do not record the sales tax portion as sales. Some people record the total amount collected as sales and then back out the sales tax from the sales account each quarter. However this is not correct because it overstates your monthly sales figures. Sales tax is not considered an expense, it is considered an item you are collecting for the government. Sales tax should never be recorded as an expense item.

Provided by Alamo Bookkeeping Associates