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Megan C
Megan C, Certified Public Accountant (CPA)
Category: Finance
Satisfied Customers: 16544
Experience:  Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
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I have a question about cost of goods sold on the schedual

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I have a question about cost of goods sold on the schedual c. I have a fully mobile repair business. I sell parts, obviously cogs. But what about the little stuff used for repair jobs. Such as the the general small items, that may or may not be billed out seperatly from the service, used for such services as electrical repair or fixing a crack by welding. Items must be purchased and used directly in the repair job. Are these things, such as electrical connections or welding rods, considered cogs on the schedual c or just an expense?

Megan C :

Thank you for your question, and thanks for using JustAnswer.com

Megan C :

I'm sorry, Shane is unavailable to assist right at the moment, but I would be more than willing to help.;

Megan C :

How are you today?

Megan C :

The items that you are explaining would be classified as "supplies" not COGS. You would not classify as COGS unless you could directly trace the items back to what you are selling.

Megan C :

They are part of the cost of providing your service.

Megan C :

As such, these are an expense, and not COGS

Megan C :

They will go in the COGS section of the Schedule C though

Megan C :

You start with beginning inventory (which is your parts) then you add the various costs such as materials and supplies, to that and then subtract out ending inventory. The amount is expensed in the current year, but is included in the cost of goods sold

Megan C :

You do not have to keep track of which jobs these parts were used for.

Megan C :

Do you have any questions?

Megan C :

If not, please take a moment to rate my response "excellent" so that I may receive credit for assisting you today.

Customer: What about subcontractors used to complete a service. Example: I am a welder but out sourced a job with another welder to help complete a job. I personally paid the subcontractor. Would this go under labor in the cogs? Also my vehicule expenses. Fully mobile business, my truck can't be used for anything personal. Are all expenses accociated with it, including fuel considered overhead expenses under cogs?
Megan C : Thanks for your follow up. Your subcontractor would be labor under cogs.
Megan C : Your vehicle costs are not under cogs. They are general expenses
Megan C : And yes, you can deduct the vehicle expense if used 100% for business
Customer: Also, let me make sure I have this right. I can continue using the cash method of accounting and deduct cogs as long as we make less than 1million. I won't be making that much at all
Megan C : You are exactly correct. You can still use the cash basis.
Customer: Thanks so much. You have been very helpful!!
Megan C :

you're welcome

Megan C :

please rate my response as excellent

Megan C :

So I may get credit for assisting you today.

Customer: Will do. Thanks!
Megan C :

Thank you....:)

Megan C and 2 other Finance Specialists are ready to help you
Thanks, XXXXX XXXXX the opportunity to assist. Please take a moment to rate my response as "excellent" so that I may receive credit for assisting you today. Thanks again for being a valued JustAnswer.com customer.
Thank you Kevin for the positive rating and the bonus. It as a pleasure working with you today and if you ever need another question answered please ask for me next time. I can answer any of your tax, finance or social security questions.

I hope you enjoy the rest of your day and thanks again.

Megan.
Customer: replied 2 years ago.
Would the gases, such as oxegen, used in welding be considered cogs since it gets "used up" to preform a service. Or is it just general shop supply, a tool?
Thank you for your follow up. This would be just a general shop supply.

Thanks, Kevin. Let me know if you need anything else. If not, please rate this response as excellent so that I may receive credit for assisting you today. Thanks
Customer: replied 2 years ago.
Thanks!
You're welcome!