What is "balance-level" inventory tracking?
What we call "balance-level" inventory tracking (and others call "periodic") is designed to be the simplest way to get your annual taxes done properly. For any sellers that have had to fill out Part III of a Schedule C, this option will look familiar.
Once per year, you need to add up the cost of your inventory. The reason you only need to do this once per year is that last year's "Inventory at end of year" should equal this year's "Inventory at beginning of year."
In addition, as you purchase additional goods or materials that you intend to sell, you will want to categorize those purchases as "Inventory"
Using these two simple steps, it becomes reasonably easy to track inventory in a way that allows you to calculate Cost of Goods Sold using a very simple formula:
Cost of Goods Sold = Beginning balance + Purchases - Ending balance
In fact, Seller Ledger's new Inventory feature highlights this:
For more help in using this option, please consider checking out:
- How do I enter my Beginning of Year balance?
- How do I calculate and record Cost of Goods Sold at the end of year?
- If I enter a Beginning of Year balance, what happens if I want to go back and enter older inventory I bought from prior years?