This topic contains 1 reply, has 0 voices, and was last updated by Crystalynn Shelton 1 year, 5 months ago.
- February 23, 2017 at 11:44 pm #72605
I just found out about fitsmallbusiness today while I was browsing on the internet. My husband has a motorcycle service & repair shop. I am concerned that I may have set up his chart of accounts incorrectly. He purchases products from a vendor and then the customer reimburses him when he sends them the invoice. Should the parts be listed as cost of goods sold? I have the parts listed as an expense and the labor listed as income. Please advise.March 14, 2017 at 5:47 pm #75282
Hi Kamesha, great question. The cost of good sold account is generally used to keep track of items that are a direct cost of the products that you sell. If you track the parts in a cost of goods sold account, it will allow you to see what your gross profit is before other expenses are deducted.
However, since your husband is being reimbursed for all of the parts that he purchases, I think tracking the parts as an expense is better. So unless he stops getting reimbursed from his customers, I would continue to post the parts to the expense account like you have been doing.
So glad you found our site, thanks for reading!