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DanielleCPA, Certified Public Accountant (CPA)
Category: Finance
Satisfied Customers: 793
Experience:  CPA experienced in tax and financial planning
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i need input please. I am involved in a business that has

This answer was rated:

i need input please.

I am involved in a business that has a question about its expenses vs revenue.

the business lays out lots of money to obtain inventory for a given year. But some of that purchase is for the following year despite inventory being bought in the current year.

How should that inventory be expensed considering it will be used over a two or three year period.

1. should it all be expensed in the year it is purchased
2. should it only be expensed for what part of it sells in the current year
3. something else?

Your suggestions would be appreciated

DanielleCPA :

Welcome and thanks for your question!

Customer: hi
DanielleCPA :

You would only expense the amounts for the inventory sold during the year.

DanielleCPA :

If you bought $50,000 in inventory and sold 50% this year, you would expense $25,000. The remaining $25,000 would be an inventory asset at the end of the year.

Customer: is it best to reconcile monthly or can it all be done at year end based on purchases vs sales
DanielleCPA :

I have some clients that it do it annually and some that do it more frequently. It depends on the sophistication of the client and their financial reporting system.

Customer: ok thank you for the excellent advise
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