Chart Of Accounts Construction - COGs or Expenses?

Aug 16, 2014
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I am trying to create a chart of accounts for a small business of 2 owners/employees manufacturing and selling garden rooms. The garden rooms are prefabricated in a workshop and delivered to the customer once complete.

Some advice on how to categorise the direct materials and indirect materials used would be appreciated. At present, I have these materials categorised as shown in the attachment. Items such as a kitchen sink, shower tray, taps etc are easy to quantify and I have put them under Job Related Costs> Material Cost (COST OF GOODS SOLD).

Items such as timber, cladding, MDF sheeting are bought in bulk amounts and one bulk purchase may not necessarily all be consumed in the building of one garden room. These items seem too arbitrary to be classed as COGs, but at the same time form the bulk of the material and expense of each garden room and therefore doesn’t seem right to be classed as just a Shop Supply Expense.

Items such as glue, tape, nails, screws, sandpaper etc make sense to be listed as a Shop Supply Expense as they are either relatively low in value or not directly forming part of the finished product. Any suggestions would be appreciated. Thanks



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VIP Member
May 12, 2011
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United States
COGS method is best for selling inventory. You are creating custom jobs. Review on internet job cost accounting.

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