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  1. #1
    Join Date
    May 2003
    Posts
    325

    Question Business Operations - Inventory

    I am curious about how you treat partial use of bulk stock.
    The story - -
    Say you run a (very) small cnc shop that makes slot-car (or rc truck) rims. You buy round bar stock in a diameter that minimizes waste in 6 foot (8, 10, 12?) lengths.
    Come inventory time (month, quarter, year end?), you find there are several partially used bars.
    The questions - -
    Do you ignore them because you only count whole units?
    Do you add them up and count whole units?
    Do you divide stock into smaller units (feet)?
    Something else?

    If you are making aluminum rims this is a nit, but if you are using titanium the dollar amount could be non-trivial.

    robotic regards,

    Tom
    = = = = =
    Never let fool kiss you, or a kiss fool you.
    - - proverb

  2. #2
    Join Date
    Mar 2003
    Posts
    4826
    Inventory for tax purposes should be accurate within a few hundred dollars. The government just wants to make sure that you aren't hiding your profits by buying inventory and expensing it all in the same year. Remember that the way you declare your business income has to be similar to what others are doing in the same business, or else you draw attention to yourself as a statistical anomaly that may bear investigation.

    Sooner or later, your inventory will go out the door as finished goods anyway, at which point, the income from inventory that has been expensed in a previous tax year becomes 100% profit in the eyes of the tax man. Either way, you pay tax, but the government wants you to pay as you go.
    First you get good, then you get fast. Then grouchiness sets in.

    (Note: The opinions expressed in this post are my own and are not necessarily those of CNCzone and its management)

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