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#156081 03/13/05 04:36 AM
Joined: Mar 2005
Posts: 88
J
JFLS41 Offline OP
Member
I posted this message in the accounting.com forum but thought I would give it a try here as well seeing there is so many knowledgable people with managment skills.

I am trying to determine the best way to do my bookkeeping when I invoice a customer. I have an electrical business with no inventory. I have two items on my invoices which are Labor and Materials. I setup the Materials item so that it will add a credit back to my Job Materials which comes under Cost of Goods Sold. Let me explain this further in case anyone needs more clarification what I am asking. In my software program, my Labor linked to Schedule C "Services Income" which I have left alone. The Materials was linked to Income but I changed it to an expense as a subcategory of "Job Materials" which shows up under "Cost of Goods Sold". It shows up as a credit back to Job Materials when I run reports. I decided to charge the exact amount of the materials I purchase from the supply house without a markup. In my profit and loss statement it shows just the Services Income under Net Sales and the Materials is hidden under the Job Materials which comes under Cost of Goods Sold as a credit back to Job Materials. The COGS is deducted from the Net Sales which gives me the Gross Profit. So can anyone tell me if the way I have set this up is permissable or should I change the Materials back to an Income item which would be added into the Net Sales or not a refund or credit to my Cost of Goods Sold as I have it now? Any help would be greatly appreciated.

Joined: May 2004
Posts: 697
D
Member
It's easy to get over my head with accounting, and you're there. My suggestion is to keep it as simple as possible. Any time you spend on this is unpaid.

I have my business checking in Quicken, and print an Itemized Categories which I hand to my accountant. I have no "books" in the usual sense. I can get other reports to keep track of the business. This year I'm focusing on billed and unbilled hours.

Dave

Joined: Feb 2003
Posts: 687
A
Member
You can drive yourself crazy learning and setting up some of those pc programs. Some like to do their own books. I would rather give it to an accountant and not waist my time and agervation.

Tom

Joined: Dec 2004
Posts: 1,064
D
Member
I would change it back, the Materials part.

Only because, when you, and you should, start adding a mark-up on your Materials, the "profit" amount on the Materials will show up as income. You will need to show as much income as possible when it comes time to do financing.

The cost of the Materials, the price you paid for them, should appear on the reports as expenses, or cost of goods depending on the software you are running.

Having said that, you should talk to an accountant, as they can advise you better depending on your application.

Dnk.....

Joined: Dec 2004
Posts: 52
K
kd Offline
Member
If a customer buys the materials they are not a part of your accounting. If you buy materials and charge for them, at cost or with mark-up, that is part of your gross sales. Do not try to make your gross sales be a lower number than it really is. Subtract COGS and labor and labor overhead and other expenses and you arrive at net profit. (not net sales)
Do not claim no inventory. Everybody knows that electricians have a stock of parts in their truck and garage, say $600. But it remains at $600 from year to year. Claimining zero inventory is a red flag for the IRS.


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