How to I record cost of goods at the end of the year with balance level tracking?

Ok, you've decided to track inventory at the balance level. In accounting jargon, this is called "periodic" inventory tracking. And by periodic, they means at least once per year, though you can do it more often (e.g. quarterly, monthly, or whenever you feel like it.)

But let's take the most extreme case, where you only want to update your inventory (and calculate cost of goods) once per year.

As a reminder, the basic formula for calculating cost of goods is as follows:

Assuming you entered your beginning of year inventory and have categorized your purchases as "inventory" throughout the year, you will likely see a screen in Seller Ledger's Inventory balances tab that looks like this:

Now clearly, we have sold a number of items throughout the year, so those "Cost of Goods Sold" and therefore the "Current Balance" amounts are incorrect. Well, the thing to do now is to count up the purchase costs of all of your unsold inventory at the end of the year. There's no way around that if you are going to file your taxes according to IRS requirements. Whatever your method, at least once at the end of the year, you need to figure out the value (cost) or your inventory.

Let's say, once you finish adding up the cost of all of your unsold inventory, you find that it add up to $993.97. That means that we need to enter a cost of goods sold total that brings that current balance total down to $993.97.

Well, going back to that original formula:

Using simple additional and subtraction, we can calculate that Cost of Goods Sold for the year should be $4,376.13 (which makes sense, because in order for us to have less inventory at the end of the year than we did at the beginning, we must have sold more inventory than we purchased throughout the year.

Now that we know what our Cost of Goods Sold was for the year, let's record it in Seller Ledger to make sure everything adds up. Just click the "Add Cost of Goods Sold" button and record that amount. You will then end up with a screen that looks like this:

That's it. Your cost of goods sold has been entered and your end of year balance will match what you counted up.