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Level 1


Hello, we are showing a big negative amount of inventory, even though we know there is plenty of inventory on hand. This is leading to issues on our financial statements. It is for a scrap recycling yard business and there are accounts set up for COGs according to type. My question is, am I just debiting the COGs sold when we purchase scrap or am I doing something else wrong or is there a step I am missing? I am new to QB so any help is appreciated. We are using QB Desktop Pro Plus 2020.

2 Comments 2
Level 15


IMO scrap yards should not be using inventory at all

Instead use the periodic inventory system, post all purchases to COGS and enter the sales using a service item linked to an income account

Level 11




I grew up in the auto repair business and have seen a number of businesses in the industry audited due to shady tax returns so I would highly suggest contacting a competent CPA that can give you some advice if you don't have one already. 


Periodic inventory is an inventory system that posts all purchases to a temporary 'Purchases' asset account before being posted to COGS and/or ending inventory at period-end.  You do not (and should not) post your purchases of vehicles to COGS directly.  If you do that, you will be expensing the entire cost of the salvaged vehicles in the yard at the time of purchase.  The IRS frowns on this because you can manipulate your income for the year to avoid taxes - just buy a bunch of salvaged vehicles in December to offset your income.


Since inventory is your business and you track it, make estimates of your beginning and ending inventory each period (year or month) and figure your COGS based on those:


Beginning inventory

+ purchases of vehicles throughout the period (month/year)

- ending inventory





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