does your Amazon online store mean an inventory adjustment so you can calculate your profit each
month well then you should watch this video cost of goods sold adjustment for calculating the
monthly profit for your Amazon online store if you have any questions about this topic you can
leave them in the comment section below and I'll do my best to help you and of course if you feel
the video helped you I hope you will click like and don't forget to subscribe to get updates on
new videos that come out all the time how do you know your monthly profit from your Amazon online
store well you know the money that comes in is the amount of gross sales that goes into the account
that we call and Amazon calls product charges that's the gross sales that were recorded as
each sale happened and represents the sales price from the items that were sold to your
customers you must subtract what you paid for those items in order to know your gross profit
but how do you know what you paid for the specific products that were sold well we know that the main
calculation for finding out your profit is sales income minus what you paid for the merchandise
that you gave the customer which is cost of goods sold equals your gross profit and it's this middle
number that we have to focus on and we learned in a prior video that cost of goods sold is equal to
beginning inventory plus purchases equals the goods available for sale goods available for
sale - your ending inventory equals your cost of goods sold so when you look at these numbers you
know that your cost of goods sold is 600 because $750 of goods available for sale that you were
able to sell minus a hundred and fifty dollars in ending inventory that you did not sell equals 600
dollars which is the cost of goods sold that's what you paid for the merchandise that went out
so how do we do this in QuickBooks well if you look at the prior video the one that we
recorded the deposit from or the deposit statement these were your accounts in the chart of accounts
and it was that account product charges that represents the sales that is what represented
the money that came in from the customers now we must add three additional accounts to the
chart of accounts in order to be able to have QuickBooks find your cost of goods sold first
we have to put an account called inventory asset and that's a current asset and if you watched the
prior video then you know that that represents the beginning inventory of one month which is the same
as the ending inventory of the next one actually it's vice versa the ending inventory of one month
which is the beginning inventory of another month anyway we have to put the account in the chart of
accounts list chart of accounts account new this is a current asset and it's called inventory asset
save and close what else do we have to put we have to put an account where you would recall
all of the purchases that you bought with the intention of selling them in the future this
is technically part of the cost of goods sold calculation so that's the type of account you
would put when you're putting account type so you go account new and this would be a cost of goods
sold type of account click continue and the name is purchases save and close and the third account
is the grand finale the actual cost of goods sold account and of course the type of account
is cost of goods sold account knew the type is cost of goods sold and the name will be cost of
goods sold okay now save and close and now we have the three accounts we need for our cost of goods
sold calculation now if you remember our previous video the example statement that was taken from an
actual online store that we recorded together was deposited on April 3rd of 2019 that deposit was
shown in the first video or rather a prior video in this little series the prior deposit recorded
sales income into the account named product charges everything else that was listed on that
deposit statement was an expense we should have had the April 1 inventory asset with a balance
with the remaining items from the end of March we didn't talk about that in a prior video but that's
what would have been there had we been doing this Seck you t'v lee now we have to set up for that in
order to show the cost of goods sold calculation so in order to replicate a real situation while
using the April 3rd 2019 statement we have to take a moment and make an adjusting journal entry to
put in what would have been the beginning balance of inventory on April 1 so this is something you
only do when you open your Amazon store and you have a bunch of inventory sitting and waiting
to be recorded this is not something you'll do every month what I'm about to show is not what
you will do every month it's what you would do at the beginning if you had inventory ready for sale
before you started using QuickBooks so just watch this journal entry dated April 1 you go company
make general journal entry put the date April 1 of 2019 and the account that you would debit is
the inventory asset for $4,000 and the account you would credit which is usually the balancing
account when you setup your QuickBooks is opening balance equity now I cannot get to sidetrack or
segwayed or tangent off into accounting theory but you should know that generally speaking opening
balance equity is the balancing account when you make a journal entry setup and you click Save and
close now we're prepared to actually record what we need the first thing we have to record are the
purchases during April of 2019 now let's imagine two example purchases of inventory during April
of 2019 so that you can see how you would record your purchases of your product let's imagine April
9th we paid Maggie the merchant $1,000 for inventory to sell well very simple you write
a check and you click April 9th and if Maggie the merchant isn't on your vendor list you put her on
the vendor list and you click OK now the amount you bought was $1,000 and the account that that
goes into is your purchases account every time you buy inventory the money comes from cash to
this purchases account which is part of cost of goods sold let's click Save and close and open
your trial balance to take a look at what's going on and you can see purchases shows up for $1,000
and your inventory asset is 4,000 and so far everything is working fine now let's imagine on
April 26th we paid her again Maggie the merchant another 1500 for more inventory to sell so we do
the same thing we click write a check and we put April whatever it is 26 and we choose Maggie the
merchant and it was $1,500 and computer remembers that we buy purchases of merchandise from her save
and close now the trial balance shows that we purchased during April a total of $2,500
worth of product and now let's find April's gross profit and net income just consider a couple of
let's assume no other deposit from Amazon in April just to make things easy clear and straightforward
we make three journal entries on the last day of the month the first journal entry will move the
beginning inventory over to the cost of goods sold account watch how we do that company make general
journal entry now the date will be April 30th okay the account is inventory asset now inventory asset
has a four thousand dollar debit balance so in order to wipe it out we put a credit of four
thousand dollars and that's how we and wipe out the inventory account the balancing debit goes to
cost of goods sold so step one credit inventory asset for the beginning balance and debit that
same amount for cost of goods sold when we save it we see inventory is temporarily zero and cost of
goods sold is temporarily four thousand dollars now step to move the April balance of purchases
over to cost of goods sold same idea purchases has a debit balance of 2500 company make journal entry
same date April 30th but this time its purchases that is credit for its ending balance and the
balancing debit goes over to cost of goods sold so again step to credit purchases to make it zero
and balance that out by debiting cost of goods sold save and close' purchases goes down to zero
so it can start fresh in the next month measuring how much you purchased in that month and cost of
goods sold is temporarily $6,500 now the grand finale put the counted April ending inventory
that means before you do step three you have to physically count your inventory and determine the
money amount that you spent on the inventory that is sitting in your warehouse or wherever you keep
it as of April 30th in this example it's three thousand dollars and it will put in to inventory
the ending inventory of this month which gives it the beginning balance of the next month and that's
what finalizes your cost of goods sold calculation watch company make journal entry and we say
inventory asset will be debit we are putting in the beginning inventory for next month because
this is the ending inventory for this month and of course the balancing account is cost of goods sold
save and close and now we have inventory asset for May one this is now your beginning inventory
in the next month and you're all ready to go into the next month and as of April thirtieth you add
three thousand five hundred dollars in cost of goods sold if you double click this number you
can see that it is the same as the calculation we learned the cost of goods sold at the end of
April is equal to the beginning inventory plus the purchases during the month - the ending
inventory and these journal entries enabled us to properly calculate our cost of goods sold and now
when we click profit and loss we can see the sales income from product charges was thirteen
thousand six fifty nine twenty two but what we paid for the merchandise we gave the customers
was three thousand five hundred and therefore our profit from buying and selling merchandise was ten
thousand we then subtract all the other operating expenses we would have to get our final net income