How to Run “End of the Year” Inventory & Sales Reports for Tax Purposes
There is a lot of talk about year-end sales reports, the end-of-the-year inventory count, year-end expense report, year-end sales, and cost of goods sold.
Almost all of the discussions revolve around the tax aspect of the year-end reports. While the year-end reports help in the assessment of tax liability and planning for next year’s budget, they also serve the operational purpose of smoothing inventory levels and reducing the cost of goods.
In this blog, we will discuss the year-end inventory count, the end-of-the-year sales reports, the year-end cost of goods sold report, the year-end expense report, and the inventory valuation report. We will end with a look at an example of how to use your vehicle expense report to track business expenses by business type.
What is a year-end inventory count? 🧮
A year-end inventory count is a critical audit of the business’s inventory that helps ensure the business is compliant with tax and corporate auditing requirements. This audit involves the business pausing operations while performing the audit to ensure an accurate inventory snapshot of the business’s inventory.
– A year-end inventory count involves taking an inventory of all goods available for sale in the business at the end of the year. This includes items such as inventory of goods on hand, raw materials, supplies, and finished goods.
– It is a great way to identify any shrinkage of inventory, which can help the business forecast what inventory might be needed in the year ahead.
The year-end inventory count requires the business to perform an audit of its financial records and the cost of goods sold to ensure that the business is accurately reporting inventory levels to external stakeholders.
The cost of goods sold can be calculated by dividing the sum of the cost of goods sold by the average inventory for a given time period.
The itemized cost of goods sold can also be used to calculate the inventory turnover rate, which can help a business determine if it is optimizing its inventory levels and if there are any issues with its cost of goods sold.
1099K from Amazon 📋
A year-end inventory count is a crucial step of the business inventory accounting cycle. It reveals the value of the inventory the business has on hand at the end of the year.
The inventory count should be thorough and include all types of inventory, from finished goods to raw materials. Businesses may need to pause operations while performing the audit to get an accurate snapshot of the available inventory.
The inventory count provides necessary data for tax compliance, corporate audits, and other management reporting purposes. It also helps detect inventory shrinkage and forecast needed inventory for the next year. Inventory counts are crucial for accurate business planning and management of business operations.
Year-End Sales Report 📝
A year-end inventory count is a process of counting the number of items that are currently in stock at a given period of time.
It helps organizations ensure that the right amount of inventory is available at the right time.
For example, an inventory turnover ratio (IR) can be calculated by taking the cost of goods sold (COGS) and dividing it by the average inventory.
This figure shows how much the inventory turnover rate has improved over the year. Keeping track of inventory levels throughout the year can help reduce inconsistencies with the annual inventory count.
Reconciling discrepancies found in annual inventory counts can be done with interim counts such as cycle counts and spot checks.
Year-end expense reports should include
- Inventory
- Office Supplies
- Shipping supplies
- Physical tools
- Computer programs
- Business-related subscriptions
- Training materials
- Contract labor, and anything else related to business purposes.
All of this information is vital for businesses to properly manage their inventories and stay on track with their business goals.
Year-End Expense Report 💵
Running a business requires accurate tracking of expenses.
It is vital to ensure the business is operating efficiently and making the best use of its financial resources. Tracking expenses is an important part of running a business, and there are many different ways to do this.
Inventory cost accounting is an important expense to track as it represents the cost of the inventory on hand.
Other common expenses include
- Office Supplies
- Shipping supplies
- Physical tools
- Computer programs
- Business-related subscriptions
- Training materials, and contract labor.
If using InventoryLab, year-end expense reports can be easily generated. Sales numbers can be reported to the IRS through Seller Central by running a Date Range Report. This report can show the total sales made during specific time frames such as the current year or the previous year. This information can be used to prepare tax returns or other financial statements.
Year-End Cost of Goods Sold 💲
The year-end cost of goods sold (COGS) is the total value of the products sold during the year. It is the cost of making the products from parts or raw materials or of buying and reselling the finished goods.
The cost of goods sold calculation includes the cost of additional products purchased or produced in the year and the ending inventory of products for sale or raw materials at the end of the year.
COGS is calculated by adding the cost of additional products purchased or produced during the year and subtracting the ending inventory of products for sale or raw materials.
COGS gives an accurate picture of how much a business has earned from its sales activities during a given period of time. A business should thus review its cost of goods sold to stay up-to-date with its profitability.
Inventory Valuation Report 💹
A year-end inventory count is a physical inventory count of the inventory that is available in the warehouse of Amazon. This inventory valuation report can be used to assess the current value of the inventory that is currently in stock at the fulfillment center.
In addition, this report can be generated using the InventoryLab tool which allows you to quickly and easily create an inventory valuation report for your business.
Both of these reports would provide an accurate assessment of the inventory levels of your business. However, if you are conducting physical counts of the inventory in the warehouse or performing spot checks on individual items, then you may want to consider an alternative option to the Inventory Valuation Report.
Inventory Valuation Reports should be run after the end of the year and they can provide insight into the financial health of your business. They can be useful when calculating the cost of goods sold as well as income statement items such as fixed cost or variable cost per item.
Overall, running an end-of-year inventory count and creating an inventory valuation report is essential for businesses looking to accurately account for their inventory levels and financial health.
Vehicle Expense Report 💸
Business-related mileage incurred for business-related trips is tax-deductible. Organizations should prepare an inventory budget to calculate the total cost of ownership for their inventory.
Interim counts such as cycle counts and spot checks can help identify inventory inaccuracy before they become a problem. The year-end cost of goods sold can be obtained from an InventoryLab report.
An audit should be done annually to compare the physical count of goods to the inventory quantity on hand. This helps ensure that the inventory balance is accurate and the cost of goods sold remains within the budgeted amount.
An accurate physical count of the inventory helps eliminate the risk of overstocking or understocking which can lead to financial losses and inefficiencies.
Conclusion 🤔
Sales tax is the first of the state sales taxes the business must collect, typically by the end of the year following the end of the calendar year.
Most states require the business to file a sales tax return using Form 1099-S, which is an end-of-year report that shows the total sales and value of inventory in the business.
In addition, businesses must also file an inventory valuation report (Form URP) with the federal government if they value inventory assets at more than $5,000.
