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Inventory and partially made items

post #1 of 9
Thread Starter 

Greetings Chefs,

 

I've owned a food cart for a few months and am getting ready to do my first real inventory count for end of year taxes and to get started on monthly inventory for getting a much better handle on food costs.  I found a simple enough spreadsheet online that I'm tweaking, coming from a software background, this doesn't look like rocket science. One question I do have is what do I do in relation to inventory both in regards to taxes and food costing for items that I make ahead of time in mass quantity and then freeze? The specific item that comes to mind is a spicy green chutney that I make. I buy the ingredients (cilantro, serranos) at case size to get a better deal, make the chutney, then freeze it in deli containers that I take out and defrost as needed. It doesn't loose quality and is a great way to reduce daily labor (as it's currently just me). The ingredients for the giant batch of chutney cost about $60, it is $245 worth of product if people buy it a-la-carte (2oz and 4oz portions) but it also comes in smaller quantities as part of some full platters. What do I write down in inventory and most importantly into my books? From a tax POV, it would definitely be better to just track the cost of the ingredients so I don't show as much, but from an assets and valuation perspective in my books, I have product that's worth more than just the raw ingredients. It realize it's not that much $ for most folks, but since I'm just starting out, I'm working with pretty low numbers.

 

Thanks!

~Deepak

post #2 of 9

I'll Have to stop by your cart next time I'm going to the Oregon coast. All you want to inventory is what the items and/or ingredients cost you. Not what you can sell the items for to your clients. It good to get a good inventory so your next inventory will be correct. You year ending inventory plus your purchases minus your Jan ending inv with be your cost usage. This will give you your food cost. 

post #3 of 9

That would be cheating.  You're basically converting inventory to sales and then counting that money in inventory.

 

No no no.

post #4 of 9

Inventory (still on the shelf) is only worth what you paid for it, always. The best way to determine the value of prepared product is to price each ingredient (usually by ounce) and then determine how much the finished product is worth, per unit, by adding up each ingredient price. 

post #5 of 9

Your inventory is worth what you paid for it not what you can sell it for. 

post #6 of 9
Inventory is important no matter how small the item is.
IMO your chutney would be easier to keep track of (both for inventory and food cost analysis) by fluid ounces.

About the actual market value of your business ( cart plus inventory) I would defer to a professional i.e. tax accountant/lawyer.

The IRS doesn't care how much your business is worth (unless you sold it and made a profit from that) only about how much it made in dollars (gross) minus how much money you poured in for ingredients, paper goods, repairs, salaries......

mimi
post #7 of 9
Redundant .
post #8 of 9

As everyone above has said, inventory is only worth what you paid for it, not what you sell it for so a full batch of your chutney is only worth $60 in terms of inventory.

post #9 of 9
Thread Starter 

Thanks all for the input everyone!

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