Inventory and Cost of Goods Sold

Understand the accounting methods and tax implications for managing inventory and calculating the cost of goods sold (COGS) with our comprehensive guide. This resource is essential for businesses involved in production, purchase, or sale of goods, providing detailed explanations on inventory identification methods, valuation techniques, and compliance with IRS regulations.

Highlights:

• Inventory Accounting Methods: Explains the use of accrual and other methods for small business taxpayers.

• Cost of Goods Sold (COGS): Breakdown of expenses includable in COGS, such as cost of merchandise, raw materials, direct labor, and factory overhead.

• Inventory Identification and Valuation: Methods like FIFO, LIFO, and specific identification for tracking and valuing inventory items.

• UNICAP Rules: Overview of the Uniform Capitalization (UNICAP) rules for businesses producing or acquiring goods for resale, including the capitalization of direct and indirect costs.

• Loss of Inventory: Guidelines for handling losses due to theft or damage and the associated tax reporting requirements.