The P&L numbers (COGS) just dont add up

[AZ-Tax]

The bookeeper's P&L has the following under COGS:

COGS: 54316
Job Costs: 12694
Job Material: 201400
Which totals: 268410 (Sch A Ln 8) and matchs to the dollar the "Total COGS" on the P&L but I see NO beginning inventory under COGS within the P&L so I contacted the Bookeeper. The Bookeeper tells me its $20K beginning inventory (found on 1/1/07 balance sheet) for which I entered on Sch A Ln 1 (inventory at beginning of year) of form 1120s and now Ln 8 is $20K more the the "Total COGS" on the P&L.

What am I doing wrong and/or are the books off? The balance sheet does balance.

[Uncle Sam]

Cogs

That's because the ending inventory should be $ 20,000

[outwest]

What he said...

Review the COGS calculation. The basic formula is

Beg Inv + Purchases - Ending Inv = COGS

You are confusing COGS with Purchases. They are two different things though it's common to see purchases labeled COGS in QuickBooks.

If you do a little algebraic manipulation of the above formula you can calculate the purchases amount from the COGS and inventory figures to make it balance.

Purchases = COGS - Beg Inv +Ending Inv

[AZ-Tax]

Ok, here is the COGS math I came up with

Review the COGS calculation. The basic formula is

Beg Inv + Purchases - Ending Inv = COGS

You are confusing COGS with Purchases. They are two different things though it's common to see purchases labeled COGS in QuickBooks.

If you do a little algebraic manipulation of the above formula you can calculate the purchases amount from the COGS and inventory figures to make it balance.

Purchases = COGS - Beg Inv +Ending Inv

$20K (begin Invtry) + $268410 (purchases) - $6550 (End invtry) = $281860 The bookeeper has Total COGS as $268409

As mentioned in my previous post, the bookeeper does not include a Begin Invtry on the P&L but she emailed me the End inventory and I found the $20K Begin inventory on the 1/1/07 balance sheet.

[Jesse]

$20K (begin Invtry) + $268410 (purchases) - $6550 (End invtry) = $281860 The bookeeper has Total COGS as $268409

As mentioned in my previous post, the bookeeper does not include a Begin Invtry on the P&L but she emailed me the End inventory and I found the $20K Begin inventory on the 1/1/07 balance sheet.

Are you doing 2007's or 2008's?
Maybe I'm reading or thinking incorrectly, but if you are doing 2008's you want 12/31/2007's ending inventory for your beginning inventory(1/1/2008), not 1/1/07's, correct?

[AZ-Tax]

Preparing 2007

Are you doing 2007's or 2008's?
Maybe I'm reading or thinking incorrectly, but if you are doing 2008's you want 12/31/2007's ending inventory for your beginning inventory(1/1/2008), not 1/1/07's, correct?

Wouldn't 1/1/07 Inventory asset on balance sheet be the same as 12/31/06 ending inventory?

[Jesse]

Wouldn't 1/1/07 Inventory asset on balance sheet be the same as 12/31/06 ending inventory?

Yes, my first thought was you are working on a return for 2008 with tomorrow as the deadline, that's what had me confused.

Sounds like the bookkeepers COGS would actually only be purchases for the year not taking into account Beg. nor Ending inventory?

[outwest]

Some math..

Your Cogs 281860 minus hers 268409 = 13451
Beg invetory 20000 minus ending inv. 6550 = 13450

Not a coincidence!

Your calculation properly deducts the net sell down of inventory. Bookkeeper's is most likely just purchases not taking into account the sale of existing inventory.

[AZ-Tax]

I appreciate everyones help and hopefully one last question..

As mentioned on a separate post, the bookkeeper wanted the 2007 Depr report after I entered all 2007 depreciable assets placed in service in 2007. Well I thought I was going to receive an updated 2007 balance sheet reflecting those current depreciations but instead I received a 2008 P&L and Balance sheet. I have the option to add the 2007 current depreciation to the accumulated depreciation on line 10b column C of Sch L? When I do, Sch L becomes imbalance to the amt of the current depreciation. I am going to assume NOT due to that fact Sch L needs to match the S-Corp books, correct?

[SFBOB]

To Az Tax ?????

AZ In all do respect, you need some hands on help. This sounds like your first 1120S Return. I am not familiar with Arizona S Corporation law however am pretty good with double enrty bookkeeping and balance sheets.
.Look at the 2006 year Deluxe Edition of Tax Book Tab 19 under S Corporations and you will find the late filing penaltiy is the smaller of the tax due or $100.00 which ever is less.S Corps, as you know do not pay tax, they are a pass through return like a partnership.
The penalty for a late filed K-1 is $50.00, however the penalties can be waived for reasonable cause.
You cannot complete your clients personal 1040 return until you finnish the 1120S and prepare the K-1
I am working late tonight finishing my last 1120S and will be happy to assist you at no charge tomorrow. If you would like to take me up on my offer E Mail Bob relz@sbcglobal.net

[Bees Knees]

Look at the 2006 year Deluxe Edition of Tax Book Tab 19 under S Corporations and you will find the late filing penaltiy is the smaller of the tax due or $100.00 which ever is less.S Corps, as you know do not pay tax, they are a pass through return like a partnership.

You need to get an updated book.

Page 19-1 of the 2008 tax year TTB says:

Late filing. For returns required to be filed after December 20, 2007, on
which no tax is due, the penalty for late filing of an S corporation return
is $85 per month times the number of shareholders, up to 12 months. If any
S corporation taxes are due, the penalty is 5% of the unpaid tax for each
month or part of a month, up to a maximum of 25%. If the return is more than
60 days late, the additional minimum penalty is $100 ($135 after 2008), or the balance of the tax due on
the return, whichever is less.

The Worker, Retiree, and Employer Recovery Act of 2008 was signed into law after the 2008 tax year TTB was printed. The update link for page 19-1 of the 2008 tax year TTB takes you to the coverage of that new law which says in part:

New law. Effective for returns required to be filed after December 31, 2008, the penalty for failure to file S corporation returns is increased by $4 per shareholder. Thus, a calendar year S corporation that files a 2008 return late will be assessed an $89 per shareholder per month penalty, up to 12 months.

[SFBOB]

WOW!!! Thanks Bees Knees

I normally purchased the Deluxe Edition every other year. Looks like The Tax Book will get more business. I was not aware of this. Thanks a bunch Bees Knees. AZ I am still willing to help you through this. Sorry I did not have this update.

[AuditorTurnedGood]

When I do, Sch L becomes imbalance to the amt of the current depreciation. I am going to assume NOT due to that fact Sch L needs to match the S-Corp books, correct?

I hate doing the Schedule L and M2 and M3 - unless I perfect the Quickbooks file first and then just import it into the tax return, I can never balance either. I make a point to avoid anyone whose company now, or inthe forseeable future will require these schedules.

I feel for you - I spent 6 hours getting one of these things to come out, and still ended up with a 3K punt to assets. Best of luck!
ATG