1. Money

Accounting for Arts and Crafts Inventory


Inventory is probably one of the largest costs for your arts and crafts business. This cost is initially classified as a current asset on the balance sheet. As you use it to make arts and crafts items and sell them to customers, the cost moves to the income statement. Find out how to account for your arts and crafts inventory regardless if you are a retailer or manufacturer.

Introduction to Accounting for Arts and Crafts Inventory

Most artists and crafters have a major cost in inventory you purchase to handcraft your arts and crafts items. This article gives you an introduction to how inventory affects all the financial statements. It also gives a brief tutorial on how the cost of inventory moves from the balance sheet onto the income statement as cost of goods sold.

Learning About the Merchandising and Manufacturing Inventory

There are two basic types of inventory: merchandising and manufacturing. A merchandiser is a retail business like an art gallery or museum gift shop. The business purchases goods from an arts and crafts manufacturer and in turn sells them to the end user - a consumer like you or me. Easy to account for, you only have to worry about purchases.

If you make the arts and crafts items, you are the manufacturer and your invoice is divided into three components: raw material, work in process and finished goods. This article explains the difference between raw materials, work in process and finished goods.

Understanding Cost of Goods Sold

The cost of goods sold (COGS) reflects all costs directly tied to any product a company makes or sells, be it a merchandiser or a manufacturing company. As merchandisers sell a product they purchase from a manufacturer their COGS will be easier to compute. This is because they only have one type of inventory to keep track of – goods they purchase for resale.

To figure a manufacturing company’s COGS you first have to calculate the cost of goods manufactured. What appears to be a simple single line item in the cost of goods sold for a manufacturing company is really a calculation in which many different variables are added and subtracted.

Walking Through Preparing Merchandising Cost of Goods Sold

Figuring COGS for a merchandiser starts with beginning inventory, which are goods you have available for sale at the beginning of the month (in other words, the leftover inventory from the prior month). Next, you have to figure the cost of purchases. This article walks you through the steps to move inventory from the balance sheet to the income statement for an arts and crafts merchandising company.

Step-by-Step Cost of Goods Sold for an Arts and Crafts Manufacturer

If you handcraft and sell your arts and crafts, you technically run a manufacturing business. Because you make your product from scratch, figuring your cost of goods sold (COGS)is more complicated than figuring a merchandising cost of goods sold.

Step-by-step, this article shows you how to factor in direct materials and work in process when calculating cost of goods sold.

Suggestions for Artists to Figure Their Cost of Goods Sold

This article provides information about types of arts and crafts costs that can go through to the income statement as an expense, rather than being included on the balance sheet as inventory.

Tracking Finished Goods Inventory

This article contains suggestions for easy ways to track finished goods inventory. Finished goods are those items that are completely made and ready to sell but have not yet been purchased. I suggest two extremely easy ways to make this arts and crafts accounting task easier: keeping a hand written journal or a simple Excel (or other) spreadsheet.

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