@buddy1955
It's understandable for this journal entry to be confusing. You're not an accountant (right?), you run an antique shop, so the fact that you know as much as you do is impressive.
"I had reconciled my opening inventory in early 2024 and have calculated my closing inventory by the appropriate formula Opening Inv (2024) + Inv Added (in 2024) - COGS (in 2024) = Ending Inventory"
Your 2024 opening inventory ($10,344.64) should be the same as your 2023 ending inventory. That should have been entered in QB as of 12-31-23 for tax purposes. Do you not have that? If not, what amount is showing in QB as of 12-31-23? What is your ending inventory on your 2023 tax return?
Technically, the correct formula is Opening Inventory + Purchases - Ending Inventory = COGS. COGS is what you're trying to determine. What you should know is your opening and closing inventories based on a physical count and how much inventory you purchased in 2024. There are some variations on this calculation based on how you record your purchases. For example, some people record the purchases to inventory instead of purchases. That's fine, it just increases your beginning inventory balance (instead of increasing purchases) but you end up with the same COGS either way.
Ideally, your yearly opening inventory should be in QB ($10,344.64 in 2024 for this example). Then, you can create this journal entry:
| | Debit | Credit |
| Inventory (ending) | 13,270.64 | |
| COGS (to balance) | 5,938.33 = (10,344.64 + 8,864.33 - 13,270.64) | |
| Inventory (beginning) | | 10,344.64 |
| Purchases (to close) | | 8,864.33 |
As a reminder, you need to take a physical count before you can make this entry. The IRS requires it. You don't calculate ending inventory based on COGS, you calculate COGS based on ending inventory.
