You track the raw materials you originally bought as expenses and you track the value of the finished product as assets (matters for valuation of the company).

Bite the bullet and get some accounting help. The short answer is that for most manufacturing companies, when you purchase raw metal, those purchases aren’t expenses - they’re raw materials inventory. There are several different ways to handle that, but again, time to get some accounting help setting this up. You’ll need it in order to complete your taxes.

Yeah this is some managerial accounting stuff. If you’re lucky, the price doesn’t fluctuate too much but let’s assume your purchase of $10k is a one time thing and you don’t need to worry about price fluctuations. Let’s say the $10k got you 1,000 “units” of raw metal so all of those units have the same cost per unit. If you have price fluctuations you could simply take an average, but there are other methods I won’t go into.

Step 1. that raw material gets booked on the balance sheet as Raw Materials inventory. It’s not expensed on the P&L yet.

Step 2. You make the “thing”. The amount of raw materials used to make the thing now gets moved to Finished Goods Inventory. You’re moving it from one part of the balance sheet to another.

Step 3. You sell the thing. NOW you get to write off the cost of the goods you actually sold. Let’s say you sold $1k worth of stuff - your cost of goods sold (COGS) is now $1k and it offsets the income from your sale. You still have $9k worth of finished goods on your balance sheet.

Generally speaking, without tracking inventory constantly, the idea is to do an inventory count at the end of the year, or very close to it. Let’s say you do your count, and you see that you only have $2k worth of inventory left as of December 31, 2023. Well, all else being equal, that tells me that your cost of goods sold should be $8k in this scenario. By doing the inventory count and looking at your sales, you can “back into” your COGS.

All of this definitely becomes a monumental pain in the ass when you figure in inventory in transit, inventory sitting in amazon warehouses, returns blah blah etc.

You’re tussling with a subtopic of accounting that I’d feel safe saying even most accountants don’t interact with on any kind of regular interval. That’s not to say we couldn’t learn, but it’s one of those specific-to-an-industry things that some don’t touch after ACC 301/302.

My first recommendation is to get outside professional help. If you want to give yourself a brief primer on the topic, I recommend you look into (these being the key phrases and terms) cost basis, cost accounting, and the following accounts: Raw material, in process goods, and finished goods.

If you have direct labor and overhead outside of yourself, it can get quite involved. Cost allocation becomes very detailed for manufacturers and is a learned skill.

Happy to answer any specific questions you have on the topic though.