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Turbotax 2011 Free Federal Edition

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Turbotax 2011 Free Federal Edition

Turbotax 2011 free federal edition 7. Turbotax 2011 free federal edition   Figuring Gross Profit Table of Contents Introduction Items To Check Testing Gross Profit AccuracyExample. Turbotax 2011 free federal edition Additions to Gross Profit Introduction After you have figured the gross receipts from your business (chapter 5) and the cost of goods sold (chapter 6), you are ready to figure your gross profit. Turbotax 2011 free federal edition You must determine gross profit before you can deduct any business expenses. Turbotax 2011 free federal edition These expenses are discussed in chapter 8. Turbotax 2011 free federal edition If you are filing Schedule C-EZ, your gross profit is your gross receipts plus certain other amounts, explained later under Additions to Gross Profit. Turbotax 2011 free federal edition Businesses that sell products. Turbotax 2011 free federal edition   If you are filing Schedule C, figure your gross profit by first figuring your net receipts. Turbotax 2011 free federal edition Figure net receipts (line 3) on Schedule C by subtracting any returns and allowances (line 2) from gross receipts (line 1). Turbotax 2011 free federal edition Returns and allowances include cash or credit refunds you make to customers, rebates, and other allowances off the actual sales price. Turbotax 2011 free federal edition   Next, subtract the cost of goods sold (line 4) from net receipts (line 3). Turbotax 2011 free federal edition The result is the gross profit from your business. Turbotax 2011 free federal edition Businesses that sell services. Turbotax 2011 free federal edition   You do not have to figure the cost of goods sold if the sale of merchandise is not an income-producing factor for your business. Turbotax 2011 free federal edition Your gross profit is the same as your net receipts (gross receipts minus any refunds, rebates, or other allowances). Turbotax 2011 free federal edition Most professions and businesses that sell services rather than products can figure gross profit directly from net receipts in this way. Turbotax 2011 free federal edition Illustration. Turbotax 2011 free federal edition   This illustration of the gross profit section of the income statement of a retail business shows how gross profit is figured. Turbotax 2011 free federal edition Income Statement Year Ended December 31, 2013 Gross receipts $400,000 Minus: Returns and allowances 14,940 Net receipts $385,060 Minus: Cost of goods sold 288,140 Gross profit $96,920   The cost of goods sold for this business is figured as follows: Inventory at beginning of year $37,845 Plus: Purchases $285,900   Minus: Items withdrawn for personal use 2,650 283,250 Goods available for sale $321,095 Minus: Inventory at end of year 32,955 Cost of goods sold $288,140 Items To Check Consider the following items before figuring your gross profit. Turbotax 2011 free federal edition Gross receipts. Turbotax 2011 free federal edition   At the end of each business day, make sure your records balance with your actual cash and credit receipts for the day. Turbotax 2011 free federal edition You may find it helpful to use cash registers to keep track of receipts. Turbotax 2011 free federal edition You should also use a proper invoicing system and keep a separate bank account for your business. Turbotax 2011 free federal edition Sales tax collected. Turbotax 2011 free federal edition   Check to make sure your records show the correct sales tax collected. Turbotax 2011 free federal edition   If you collect state and local sales taxes imposed on you as the seller of goods or services from the buyer, you must include the amount collected in gross receipts. Turbotax 2011 free federal edition   If you are required to collect state and local taxes imposed on the buyer and turn them over to state or local governments, you generally do not include these amounts in income. Turbotax 2011 free federal edition Inventory at beginning of year. Turbotax 2011 free federal edition   Compare this figure with last year's ending inventory. Turbotax 2011 free federal edition The two amounts should usually be the same. Turbotax 2011 free federal edition Purchases. Turbotax 2011 free federal edition   If you take any inventory items for your personal use (use them yourself, provide them to your family, or give them as personal gifts, etc. Turbotax 2011 free federal edition ) be sure to remove them from the cost of goods sold. Turbotax 2011 free federal edition For details on how to adjust cost of goods sold, see Merchandise withdrawn from sale in chapter 6. Turbotax 2011 free federal edition Inventory at end of year. Turbotax 2011 free federal edition   Check to make sure your procedures for taking inventory are adequate. Turbotax 2011 free federal edition These procedures should ensure all items have been included in inventory and proper pricing techniques have been used. Turbotax 2011 free federal edition   Use inventory forms and adding machine tapes as the only evidence for your inventory. Turbotax 2011 free federal edition Inventory forms are available at office supply stores. Turbotax 2011 free federal edition These forms have columns for recording the description, quantity, unit price, and value of each inventory item. Turbotax 2011 free federal edition Each page has space to record who made the physical count, who priced the items, who made the extensions, and who proofread the calculations. Turbotax 2011 free federal edition These forms will help satisfy you that the total inventory is accurate. Turbotax 2011 free federal edition They will also provide you with a permanent record to support its validity. Turbotax 2011 free federal edition   Inventories are discussed in chapter 2. Turbotax 2011 free federal edition Testing Gross Profit Accuracy If you are in a retail or wholesale business, you can check the accuracy of your gross profit figure. Turbotax 2011 free federal edition First, divide gross profit by net receipts. Turbotax 2011 free federal edition The resulting percentage measures the average spread between the merchandise cost of goods sold and the selling price. Turbotax 2011 free federal edition Next, compare this percentage to your markup policy. Turbotax 2011 free federal edition Little or no difference between these two percentages shows that your gross profit figure is accurate. Turbotax 2011 free federal edition A large difference between these percentages may show that you did not accurately figure sales, purchases, inventory, or other items of cost. Turbotax 2011 free federal edition You should determine the reason for the difference. Turbotax 2011 free federal edition Example. Turbotax 2011 free federal edition   Joe Able operates a retail business. Turbotax 2011 free federal edition On the average, he marks up his merchandise so that he will realize a gross profit of 331/3% on its sales. Turbotax 2011 free federal edition The net receipts (gross receipts minus returns and allowances) shown on his income statement is $300,000. Turbotax 2011 free federal edition His cost of goods sold is $200,000. Turbotax 2011 free federal edition This results in a gross profit of $100,000 ($300,000 − $200,000). Turbotax 2011 free federal edition To test the accuracy of this year's results, Joe divides gross profit ($100,000) by net receipts ($300,000). Turbotax 2011 free federal edition The resulting 331/3% confirms his markup percentage of 331/3%. Turbotax 2011 free federal edition Additions to Gross Profit If your business has income from a source other than its regular business operations, enter the income on line 6 of Schedule C and add it to gross profit. Turbotax 2011 free federal edition The result is gross business income. Turbotax 2011 free federal edition If you use Schedule C-EZ, include the income on line 1 of the schedule. Turbotax 2011 free federal edition Some examples include income from an interest-bearing checking account, income from scrap sales, income from certain fuel tax credits and refunds, and amounts recovered from bad debts. Turbotax 2011 free federal edition Prev  Up  Next   Home   More Online Publications
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The Turbotax 2011 Free Federal Edition

Turbotax 2011 free federal edition 6. Turbotax 2011 free federal edition   How To Get Tax Help Whether it's help with a tax issue, preparing your tax return or a need for a free publication or form, get the help you need the way you want it: online, use a smart phone, call or walk in to an IRS office or volunteer site near you. Turbotax 2011 free federal edition Prev  Up  Next   Home   More Online Publications