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Lee DeRaud
11-28-2007, 2:27 PM
For you guys that make enough money at this to file a Schedule C:

How do you handle "consumables" like wood, sandpaper, glue, and finishing supplies? Do you just expense whatever you buy each year or do you have to treat it as inventory?

(My apologies for posting this in multiple forums, but I suspect I'm going to get different answers depending on the type of work being done.)

"Jason Belous"
11-28-2007, 3:30 PM
I run mine as a straight deduction. This is part of my direct job cost so this is a straight deduction. I do not believe that my accountant runs it as company overhead. Maby someone who does their own taxes can help out a little better.

Randy Cohen
11-28-2007, 4:05 PM
I'm a CPA and without getting overly technical and tedious you should expense those supply items in the year of purchase. The exception might be the lumber on hand which is probably the most expensive of those items. I'm thinking of lumber that will be used to build something you're going to sell. Not leftover scraps. Also if you have a finished product that you are selling and the sale is not completed until the next tax year you should probably account for the costs of making that product in inventory. This can go on and on as tax law is clear as mud.

Jim Becker
11-28-2007, 4:53 PM
I feel that Randy has the right advice. "Consumable consumables"...expense. "Major consumables" like lumber and plywood is a little stickier, but accruing costs may be appropriate. Only "your" accountant can help you understand the impact on taxes relative to deferred income on work that spans your fiscal year and the cost of goods related to it.

Many businesses will expense tools and tooling, too, depending on their situation. (definitely a discussion item for your accountant, however, to figure out what's best for you)

Robert Waddell
11-28-2007, 10:07 PM
I'm a woodworking business owner. It is my understanding that if it is part of the product/s you make then it is counted in inventory based on your cost. This could be screws, lumber, glue, hardware, etc. If it is completed product in your posession at the end of the year, then the product is inventoried at the material cost of the product and not the wholesale or retail price. When you do your Schedule C your year ending inventory is compared to your starting inventory to determine your gain or loss. If it is comsumed by or used in the process it is expensed in the year it is purchased. This could be sandpaper, bits, hand tools, clamps, etc.
Hope this helps ya.
Rob