Click to Print

Can this out-of-inventory order be called a business expense?

Usually we buy plenty of doors at the beginning of the year and then charge the customer for parts and labor a the time the sale is made. We recently had a customer that didn't want a door from our inventory, so the customer prepaid for a door that had to be ordered. Is the door still a business expense to us even if we had to pay for it from our business bank account although we got a check from the customer?
Pam Newman answered April 22, 2008
URL: http://www.entrepreneur.com/answer/221389
It would be a reimbursable business expense. You paid for the door, so it's a cost-of-goods-sold expense. The amount you charge the customer is income to you. If it's dollar for dollar, then you can run it as income or just reimbursed business expense.
Pam Newman is a Certified Management Accountant, author and Certified QuickBooks ProAdvisor for Financial and Point-of-Sale software. She is also president of RPPC, Inc., which provides customized business development services.