Inventory

by Brad Wellman
(Illinois)

I use business money to have books published. Buying 2000 books. I sell 1000 books and the initial debt to the business is payed back. How do I report the 1000 books left in the inventory on the financial statement?


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Hi Brad!

When you purchased 2000 books, say for $2 each, or $4000, you could have debited Inventory, and credited Cash for the $4000.

Then when you sold 1000 books, you would record the sale as a debit to Cash and a credit to Sales. So if you sold the books for $4 each, you would post $4000 to Cash and to Sales.

Then you would record the change in Inventory as a debit to Cost of Goods Sold, and a credit to Inventory for the $2 for 1000 books, or $2000.


If you don't really have an accounting system or a General Ledger, and are just preparing financial statements, then show a Cost of Goods Sold (an Expense account) for what you bought the 1000 books for on your Income Statement (aka Profit & Loss Statement), and show the amount you paid for the 1000 books left in Inventory, which is an Asset account, on the Balance Sheet.

You would also show the change in Cash (decrease for the purchase of books, and increase for the sales) and that would show on the Balance Sheet also.

Hope that helps!

If not, send me an email.

Kathy

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