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QP2
Level 1

Are stock videos licensed for a client Inventory?

We develop interactive exhibits for clients.  For some of these exhibits we purchase stock video and images that go into the product delivered to the client.

 

Should these be entered as "Inventory" when purchased, and then moved to Cost of Goods Sold (COGS) when the software is delivered?  (In the current case the videos were purchased in 2021 and the software will be delivered in 2022).  Or should they just be entered as computer/office expenses when purchased and never show up in COGS?

 

 

 

 

5 Comments 5
Rustler
Level 15

Are stock videos licensed for a client Inventory?

COGS is for items that are stocked and sold, inventory items in other words.  You can use it for anything but when you file taxes, COGS is very specifically calculated for inventory items sold.

 

If it were me I would use a COGS type account called COS, Cost of Sales and post the cost of what is bought for customers to it

QP2
Level 1

Are stock videos licensed for a client Inventory?

Thank you, Rustler.

 

I wondered about using a COGS account since the videos were purchased in one tax year, while the revenue from invoicing the client came in the next tax year.  (Note: using cash based accounting)

 

Would a Cost of Sales account correctly handle the expense and the income occurring in separate years?

QP2
Level 1

Are stock videos licensed for a client Inventory?

Thank you, Rustler.

 

I wondered about using a COGS account since the videos were purchased in one tax year, while the revenue from invoicing the client came in the next tax year.  (Note: using cash based accounting)

 

Would a Cost of Sales account correctly handle the expense and the income occurring in separate years?

Rainflurry
Level 13

Are stock videos licensed for a client Inventory?

@QP2 

 

Since you are on cash basis, it's best to record them as a supplies expense (or something similar).  COGS should be avoided in this case.  It's acceptable to deduct the expense when paid in one period (2021) and the income is received in another (2022) unless the time period in between exceeds 12 months.

 

QP2
Level 1

Are stock videos licensed for a client Inventory?

Thank you, Rainflurry.

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