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Experienced Member

New retail product creation

Hello,

 

I need some help out here. I have a company that sales socks. We design the socks and then send them to a company to finish the digital part of the design and add some touches.

 

Initially, I designed 5 different styles, and they I added that to Start Up Cost. Right, now I designed another one, and I sent it to the designer to do a digital copy but I don't know where to record that. It isn't a regular expense since it is merchandise that I sale and the nature of my business.

 

How can I properly record it on my books?

 

Thank you in advance,

 

 

1 Comment
Established Member

Re: New retail product creation

Macia,

 

Since the design is likely to be reused, accounting principles dictates that you amortize the cost of the design over the quantity of units you expect to produce, similar to the cost of tooling in a factory. That said, however, it depends on how significant the cost is. A smaller cost could be treated as a period cost, like a consumable supply. I hope that helps.

 

Best, 

Mat D