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Does a cash basis retail store have to deduct inventory from

Customer Question

does a cash basis retail store have to deduct inventory from purchases to compute cost of sales?
Submitted: 1 year ago.
Category: Tax
Expert:  emc011075 replied 1 year ago.

Hi. My name is ***** ***** I will be happy to help you.

If you carry inventory you will have to figure out cost of goods sold or COGS. Because your current inventory are not sold yet, you will have to deduct them from the purchases (total inventory). Cost of inventory is not deductible until your inventory are sold. If you purchase 50 pairs of shoes for a resale but only sell 30 pairs, you can only deduct cost of those 30 pairs.