Tax time: COGS, inventory value and your expense summary

Once a year somebody — your accountant, your tax software, or you at a kitchen table in February — needs one number: what did the things you sold actually cost you? This page is about getting that number out of OrderDen, and about being able to show your working when someone asks.

You do not need to understand accounting to use it. You do need to have been recording what you bought and what you made, which you have been.

The short version

Reports → Cost of goods sold. Pick the year. Read the last line. Export it to CSV or PDF and send it on.

Everything below is what the lines mean and why they are what they are.

Cost of goods sold

The report has seven lines, in the order a tax return asks for them. Here is a candle maker's first year:

Read it as a sentence: she started the year with $1,200 of wax and jars on the shelf, put another $6,855.51 of stuff and time in, and finished with $1,845.20 still on the shelf — so $6,210.31 of it went out of the door in candles.

Where each line comes from:

• Inventory at the start — what your stock was worth the day before the period, at weighted-average cost.
• Purchases — everything received into stock during the period, at what it landed at: freight and tax included.
• Cost of labour — the hands-on time frozen onto the production runs you completed, at your hourly rate.
• Materials and supplies — consumables you bought and used without ever counting them as stock, plus the expenses whose category is flagged as cost of goods — the wax bought over a counter with a card and no purchase order behind it. Anything you do track is already in Purchases; counting it twice is the classic way to get this wrong, so OrderDen does not.
• Other costs — the overhead your batches carried: the share of the workshop's running costs your recipes add on top of materials and labour.
• Inventory at the end — the same valuation, on the last day of the period.

Every figure opens

Each line links to the rows behind it. Purchases opens the receipts. Cost of labour opens the production runs. Inventory opens the movement ledger. Nothing here is a number you have to take on trust, which is the point: a figure you cannot take apart is a figure you cannot defend.

Show as Schedule C Part III

The seven lines are laid out the way the American Schedule C form asks for them, and the toggle at the top prints its line numbers and its wording. The arithmetic is the same everywhere — this is simply what cost of goods sold is — so the report is called "Cost of goods sold" and only wears the form's words when you ask.

Does it tie out?

Under the statement is a panel that reconciles it against the stock ledger, and it is worth understanding, because the two answers are supposed to differ.

The statement works cost of goods out the way a tax form does: what you started with, plus what went in, less what you ended with. The ledger works it out from what actually left with a shipment. Everything that left your shelf without being sold is the gap:

• Waste written off — material spoiled on a run.
• Adjustments and stock counts — damage, gifts, samples, shrinkage, and the differences a stock count booked.
• Opening balances entered in the period — stock you counted in without buying it, usually on the day you switched tracking on. It raises inventory without a purchase behind it, so it reduces the statement's cost.
• Customer returns — goods that came back.
• Materials never held as stock — consumables that were used up without any movement recording them leaving.

Add those to what shipped and you get the statement's figure exactly. If they do not add up, the report says so rather than quietly rounding the difference away — that almost always means some stock moved before anything knew what it cost, and the movement ledger will show you which.

Curing stock at year end

A batch that is curing is inventory: it is on your shelf, it is worth money, and it cannot be sold. So a big batch curing over the year end raises your ending inventory and lowers your cost of goods by the same amount. That is correct — the cost belongs to the year you sell it in, not the year you poured it — and it is worth knowing before you wonder why the number moved.

Inventory valuation

Reports → Inventory valuation answers "what was the stock worth on this date?" for any date, not just today. Pick 31 December and you get exactly the figure line 41 of the statement uses.

Each row is an item — or a variant, where that is where the stock lives — with the quantity on hand, what it averaged out at, and what that comes to. Curing stock is included in the value and shown in its own column. Underneath, totals by what things are: materials and supplies on one line, finished goods on another.

It is a sum, not a recalculation: every stock movement records what it was worth at the time, so a valuation on any past date reads the same ledger and gets the same answer it would have got that day.

Expense summary for tax

Reports → Expense summary is the companion. Cost of goods sold covers what the goods cost; this covers everything else — advertising, rent, software, insurance, mileage — grouped by the Schedule C line it belongs on.

It reads the spend category on every purchase and every expense, so the more consistently you categorise, the more useful it is. A category's own tax line decides where it reports; when a category has no tax line set, OrderDen falls back to recognising the words most makers use ("Advertising", "Software", "Rent", "Postage"). Anything it still does not recognise is listed under Not mapped yet rather than guessed at: a blank line on a tax form is a question, but a wrong one is a problem.

Categories flagged as cost of goods — packaging, filament, wax — are counted on the cost-of-goods statement instead, and the summary says how much went that way so nothing quietly disappears.

Expenses are counted net of the tax on them, because that tax comes back through your own return rather than being a cost of trading.

For the month-to-month view of the same spend — and for whether the business made anything after it — see Expenses by category and profit and loss.

Your financial year

If your year does not start in January, the fiscal-year presets follow yours. The report also prints the inventory method it used — weighted average, which is what the stock ledger maintains — and the moment it was generated, because a figure with no provenance is a figure nobody can check.

Sending it on

CSV opens in a spreadsheet and carries a header block with the workspace, the period, the method and the generated-at stamp. PDF is a one-page statement with the reconciliation printed underneath — the thing you email to your accountant. Both are noted in your activity trail, so a year later "which version did we send?" has an answer.

All three reports are on the API too.

If what your accountant wants is the whole period rather than a statement, the accounting export hands over the underlying documents in the shape their software imports, journal included.

OrderDen gives you your own figures in a shape a tax form recognises. It is not tax advice, and it does not file anything for you.