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Level 1

COGS Made to Order Items

I am starting my own business and have no clue what I'm doing in terms of accounting but am trying to figure it out. I make and sell custom wood products primarily tables, signs, butcher blocks and decorative boxes. I have no inventory and make everything after the order and payment is received. I do keep glue, screws, paint, stain and other supplies at the shop but the bulk of the expense is the wood which is purchased as each order is received. I understand that Cost of Goods Sold is determined via inventory but I don't keep inventory. I'm wondering how I track the cost of each item sold. For example: if I get an order for a table I would design the table with the customer, take payment and then go and purchase the wood needed as well as supplies (screws, glue, etc) that I'm low on. I'd then assemble the table and deliver it to the customer. If I understand right if I kept tables in inventory to sell the COGS would be the time/labor to design, build and deliver as well as cost of the wood and supplies and overhead for the time I was building. Because my items are not kept in inventory I wouldn't use COGS for tracking these expenses. Would I just track them as supplies/materials? Also how would I track items that are used for several products ie. glue, screws, stain, etc. Measuring and counting all of these things would take too much time to make sense financially. Thanks for any insight!

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Best answer February 03, 2020

Best Answers
Highlighted
Level 15

COGS Made to Order Items

When you have cost but do not hold inventory like in your situation, open the chart of accounts and click new, select COGS and for detail type select Cost of Sales (COS). Then make the COGS account inactive.

Post all purchases for the order to COS

screws, glue, sandpaper, etc are an expense, use shop supplies expense when you purchase

Unless you are taxed as a corporation, your time/labor has no cost in business accounting.

 

View solution in original post

1 Comment
Highlighted
Level 15

COGS Made to Order Items

When you have cost but do not hold inventory like in your situation, open the chart of accounts and click new, select COGS and for detail type select Cost of Sales (COS). Then make the COGS account inactive.

Post all purchases for the order to COS

screws, glue, sandpaper, etc are an expense, use shop supplies expense when you purchase

Unless you are taxed as a corporation, your time/labor has no cost in business accounting.

 

View solution in original post

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