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1125-A | Cost of Goods Sold Issue - Frustrated

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    1125-A | Cost of Goods Sold Issue - Frustrated

    Hello,

    Thank you in advance for any suggestions on how to resolve this issue.

    I am having an issue with the COGS, where the total listed in QBO does not match the total listed on the 1125-A. This is hugely frustrating, as the totals listed on the 1125-A match the line items reported on the P&L for COGS. It's almost like the change (increase) in inventory is not reflected in COGS. There is inventory shrinkage, which is recorded correctly. Net income between book and tax is off by the same amount ($44,104; including book to tax adjustments).

    I am hoping you can offer some suggestions on where to investigate this issue, as I am out of ideas.

    Beginning Inventory: 105,434
    Ending Inventory: 149,538
    Difference: 44,104

    Total COGS in QBO: 1,118,753
    Total COGS on Tax Return: 1,074,649
    Difference: 44,104

    #2
    I believe QBs does not take into account the increase/decrease in inventory so you have to make a inventory adjustment in QBs.
    Inventory can get so messed up in QBs but you have the exact numbers.

    Is this Quickbooks Online or Quickbooks Desktop?

    Can you tell me the exact numbers on 1125-A to get you to that the tax return COGS?
    Last edited by geekgirldany; 03-02-2018, 04:50 PM.

    Comment


      #3
      Originally posted by jmailoffers View Post
      Hello,

      Thank you in advance for any suggestions on how to resolve this issue.

      I am having an issue with the COGS, where the total listed in QBO does not match the total listed on the 1125-A. This is hugely frustrating, as the totals listed on the 1125-A match the line items reported on the P&L for COGS. It's almost like the change (increase) in inventory is not reflected in COGS. There is inventory shrinkage, which is recorded correctly. Net income between book and tax is off by the same amount ($44,104; including book to tax adjustments).

      I am hoping you can offer some suggestions on where to investigate this issue, as I am out of ideas.

      Beginning Inventory: 105,434
      Ending Inventory: 149,538
      Difference: 44,104

      Total COGS in QBO: 1,118,753
      Total COGS on Tax Return: 1,074,649
      Difference: 44,104
      Accounting 101: COGS equals beginning inventory + purchases - ending inventory.

      QB does not have an account for purchases so you need to back into it by taking COGS - beginning inventory + ending inventory.

      Comment


        #4
        Hi, Thanks for responding.

        I forgot to include the client uses the accrual method of accounting.

        The client uses QuickBooks Online.

        If I am understanding how QBO operates, the increase in inventory would not be included in COGS yet since the items have not been sold. However, the 1125-A is including the overall purchases for the year (which don't include the items added to inventory) and then reducing the overall COGS figures by the ending inventory.

        Below are the figures as reported on the 1125-A:

        Beginning inventory: 105,434

        Purchases: 606,678
        Cost of Labor: 391,068
        Other Costs: 121,007
        Total: 1,224,187

        Less - Ending Inventory: 149,538

        Total COGS: 1,074,649 (Per 1125-A)

        Total COGS: 1,118,753 (Per QBO)

        Comment


          #5
          Originally posted by jmailoffers View Post
          Hi, Thanks for responding.



          If I am understanding how QBO operates, the increase in inventory would not be included in COGS yet since the items have not been sold. However, the 1125-A is including the overall purchases for the year (which don't include the items added to inventory) and then reducing the overall COGS figures by the ending inventory.
          Where to you think QB put the offsetting credit for the debit increase in inventory?

          QB already has the change of inventory reflected in COGS, so you need to back it out to come up with purchases.

          Comment


            #6
            Kathy,

            Thanks for responding.

            If I am understanding you correctly, Purchases in COGS on the 1125-A needs to include the increase in inventory since the form is taking into consideration both the beginning and ending inventory?

            Comment


              #7
              Originally posted by geekgirldany View Post
              I believe QBs does not take into account the increase/decrease in inventory so you have to make a inventory adjustment in QBs.
              Inventory can get so messed up in QBs but you have the exact numbers.

              Is this Quickbooks Online or Quickbooks Desktop?

              Can you tell me the exact numbers on 1125-A to get you to that the tax return COGS?
              @geekgirldany Thanks for your feedback. I've reached out to the developers to have them fix this issue. [We shouldn't have to be making manual inputs in the tax return for inventory after the trial-balance import is mapped and completed].

              Comment


                #8
                The tax return will always be off by the amount of the inventory change. For me, the easiest way to rectify this is to create a "Beginning Inventory" and "Ending Inventory" account in the QB Cost of Goods section. They will tie out to the actual numbers with the BI a debit and ending inventory a credit.

                When you post from your QB trial balance/general ledger (or any other software) to the tax return, you will post the Purchases account balance which will now be adjusted for the inventory change.

                Comment


                  #9
                  Originally posted by ttbtaxes View Post
                  The tax return will always be off by the amount of the inventory change. For me, the easiest way to rectify this is to create a "Beginning Inventory" and "Ending Inventory" account in the QB Cost of Goods section. They will tie out to the actual numbers with the BI a debit and ending inventory a credit.

                  When you post from your QB trial balance/general ledger (or any other software) to the tax return, you will post the Purchases account balance which will now be adjusted for the inventory change.
                  Does QBO even support inventory? I believe that if you use Quickbooks as designed to actually manage inventory (inventory items in the company file with costs assigned, quantity on hand updates, etc) it will work correctly, but probably need higher end desktop version to do this.

                  Comment


                    #10
                    Quickbooks Online does have inventory now but I would not use QBO for any business. It is still limited, duplicate entries coming in from bank/credit card accounts, A/R & A/P messed up worse than QB Desktop, etc. I could list many many reasons why a business should not use QBO. Plus you really should not import anything from Quickbooks into a tax program. Manually fill in the tax return with the financials you print from QBs. I would suggest to your clients to convert to Quickbooks Desktop. They now have cloud versions of it if the only reason they use QBO is because of accessibility. If they have a inventory add-on for QBO... I would not be very trustful of it.

                    Sorry rant on QBO just don't like it and Intuit is really pushing it.

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