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Gahvac
Level 1

Cost of Goods Sold

I buy equipment for heating and air jobs that I quote customers for. Then in quickbooks I list it as cost of goods sold, and then the customer pays me for the equipment however this is making my taxable profit go up. I feel like I’m missing something in between to document that the customer is essentially cancelling out my original purchase of the equipment and that I’m not making anything off the resale of the equipment, just the labor. What am I missing? 

1 Comment 1
Rainflurry
Level 14

Cost of Goods Sold

@Gahvac  

 

You aren't missing anything.  If you buy a furnace for $3,500 and assign it to COGS and bill your customer for $3,500 and assign that to revenue (gross income), your P&L will show $3,500 in revenue and -$3,500 in COGS resulting in $0 of net (taxable) income.  The only issue is if you're assigning the bill for the furnace to an account other than an expense account of COGS or you're marking up the furnace.  Both of those will cause your net (taxable) income to increase.  

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